Understanding the Different Types of Fidelity and Crime Insurance Coverage

Fidelity and crime insurance—often referred to simply as fidelity insurance—protects businesses from fraudulent acts by their employees. Every year, companies across Florida lose thousands of dollars due to dishonest acts by those who work for them. These losses are enough to cause some businesses to shut their doors for good.

Fidelity and crime insurance exists to cover these losses and protect companies from fraud or embezzlement, but what do these policies actually cover? In addition to employee-related crimes, some policies can protect you from losses caused by third parties like contractors. Ver Ploeg & Marino is a leading Miami insurance law firm that stands ready to support you if your insurer denies your claim.

Crime Insurance Covers Theft Committed by Employees

While many of the schemes that lead to fidelity and crime insurance coverage are sophisticated, others involve little more than an employee taking something from the workplace without permission.

Employees are put in positions of trust when it comes to physical assets owned by the company. The unfortunate reality is that these items are often taken or kept by workers with the intention of defrauding the company. These acts can involve a large volume of relatively inexpensive items, like printer paper or office supplies. However, the real threat is small, valuable items like laptop computers or other devices.

Trusted Employees Could Embezzle Funds Directly From the Company

Not all losses caused by an unscrupulous employee involve illegally accessing funds or forging signatures. The unfortunate truth is that trusted, long-term employees with access to company funds or accounts can abuse their authority without notice.

There are numerous ways this type of fraud might play out. Some workers might simply transfer money from company accounts into their own private accounts or otherwise convert it to cash. This approach is simple, but it is also likely to raise flags in an accounting department.

Other acts of embezzlement are much more sophisticated. It could include creating a fake company and then paying fraudulent invoices for goods or services that never existed. Some might offer kickbacks to employees of actual vendors, then overpay inflated invoices.

In the end, embezzlement is a type of fraud that usually involves a person in a position of trust. There is usually no way to predict who might break that trust, even long-term employees who have held the position for years. When these schemes are uncovered, it is not uncommon to learn they were taking place on a small scale for years or even decades.

Forgery is a Type of Fraud Many Companies Fail to Consider

Forging signatures and falsifying documents is another common type of fraud that is covered by fidelity and crime insurance. One of the easiest ways for an employee to gain access to funds that they otherwise could never reach is by falsifying a manager’s signature on the document. This can be difficult to trace, as the victim of the forgery is unlikely to know who forged their signature in the first place.

In addition to committing forgery to redirect funds from company bank accounts, another common strategy involves opening fraudulent company credit cards. This can result in enormous expenditures before the company is ever made aware of the fraud. While insurance companies often reverse these charges, there is no guarantee that will happen—especially for large expenditures.

Social Engineering is a Sophisticated Approach to Workplace Theft

If theft is on one end of the workplace crime spectrum, social engineering is on the other. Instead of taking petty cash or items that can be easily removed from the office, social engineering is the act of manipulating those who work for you into giving up vital information—typically passwords.

These scams can come in many forms. The goal is to trick an employee into providing sensitive information that they would never freely provide. Many social engineering schemes involve “phishing,” which include emails that prompt an employee to provide their login credentials and password. The emails are designed to look official, but the purpose is to fraudulently obtain that sensitive information.

Once a fraudster has access to an email account within the company, they can cause all kinds of problems. This includes accessing and taking sensitive client data like credit card numbers, which could be used to make fraudulent purposes or sold to others. When a person gains access to the email address of high-level management, they could authorize fraudulent bank transactions worth thousands.

With some crime insurance policies, social engineering coverage might require some kind of additional endorsement. It is vital that you carefully review the terms of your policy prior to filing a claim. Our firm can make sure you are treated fairly during the claims process.

Third-Party Claims May Also Be Covered

These policies are generally designed for fraud committed by employees, but many businesses rely on third parties that function as if they work for the business as well. This might include independent contractors working on a part-time basis.

Whether or not a policy covers fraud or theft committed by a third party depends on the language of the insurance policy. Some companies might require additional coverage beyond their basic fidelity and crime policy to cover this type of loss.

Talk to Ver Ploeg & Marino About A Denied Fidelity and Crime Insurance Claim

There are few things more upsetting than learning a member of your own team was responsible for acts of theft that could cripple your company. These situations only get worse when the insurance company refuses to accept a claim on your fidelity or crime insurance policy.

If your claim was denied, the team at Ver Ploeg & Marino is here to help. We understand what it takes to resolve denied insurance claims, and we look forward to the chance to help you get the recovery your business deserves. We are proud to represent business owners while they fight for a fair outcome to the claims process. Contact us right away to learn how we can help.

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