Crime Form and Third Party Coverage

Does the employee fidelity bond (form A) provide coverage if the insured employee steals from a third party? Our insured real estate management company's employee stole items belonging to the owner of one of the properties, selling them and pocketing the money. Does the fidelity bond pay on behalf of the dishonest employee?

Arkansas Subscriber

Probably not, unless the form is endorsed to provide coverage. The older Employee Dishonesty Crime Form A defined “employee dishonesty” as dishonest acts committed “with the manifest intent to: (1) cause you [the named insured] to sustain loss; and also (2) obtain financial benefit. The second, but not the first, criterion is met. The newer form (CR 00 20) does not have these restrictions, but covers “theft” of money, securities, and other property. “Theft” means “unlawful taking of 'money', 'securities' or 'other property' to the deprivation of the insured.” Here, it was not the insured that was deprived; it was the client. Further, condition E.1.n. (Ownership of Property; Interests Covered) states that coverage is limited to “property… for which you are legally liable, except for property inside the premises of a 'client' of yours.”

In order to cover this exposure, form CR 04 01 03 00, which extends coverage to clients of the insured, should be attached.