Insurance After Employee Betrayal

Fidelity bonds can provide coverage for loss resulting from dishonest or fraudulent acts by employees, but too frequently companies forfeit coverage by making errors after learning about an employee’s misconduct. One crucial issue for bond coverage is determining when a loss is “discovered.” It’s important this be clarified and defined with the claim process in mind. This and other common traps for the unwary are discussed in a Today’s General Counsel article by Lowenstein Sandler attorney Joseph M. Saka. “There are many priorities to address once a company discovers that it has been betrayed by one of its employees,” he says, “and insurance for the loss may not be top of mind. To assure that coverage provided by fidelity bonds is not forfeited, bondholders need to educate themselves with respect to the requirements for their fidelity bond coverage, and have a plan in place to timely comply with those requirements.”