One of my clients, a physician, learned that his office manager had accepted more than $3,000 in personal long-distance phone calls during her employment. She concealed the charges from the physician by removing them from the bills she submitted for her boss's approval, so he paid them. My client does carry employee dishonesty coverage.
The carrier denied coverage because the adjuster believes that the loss does not meet the definition of property covered as stated in the employee dishonesty form.
The employee dishonesty coverage is written on form CR 00 01 with carrier-specific common policy conditions and crime general provisions. Should this claim be covered or not covered?
Ohio Subscriber
We believe that this claim should definitely be covered.
The employee dishonesty form covers loss of “money,” “securities,” and “property other than money and securities” from loss due to “employee dishonesty.” We believe that the cash your client had to pay because of the dishonesty of this employee falls within the definition of “money.”
Although the office manager did not reach into the safe and take cash, the physician did lose money by paying the unauthorized phone bills. You will note that the insuring agreement states the carrier will pay for “loss of, and loss from damage to, Covered Property resulting directly from the Covered Cause of Loss.” It is our opinion that this loss of money is the direct result of employee dishonesty, even though a third party (the phone company) actually received the money. The employee did receive financial benefit from her dishonest acts.
During a discussion of this claim one of the FC&S editors questioned whether the theft met the definition of “employee dishonesty,” which requires that the dishonest act(s) be committed by an employee with the “manifest intent” to cause the insured to sustain a loss and to obtain financial benefit. This editor questioned whether the office manager exhibited a manifest intent to cause her employer harm. We agreed, however, that the requirement of manifest intent simply precludes simple negligence, such as bookkeeping errors, which was not the case here. This office manager concealed the bills in order to have them paid by her employer.
Based on the above reasoning we believe that this claim should be covered up to the limit of coverage provided on the employee dishonesty policy.