My insured's leased employee was given expense money and disappeared with it. The insurance company that writes the employee dishonesty coverage denied the claim. The company says that leased employees are not covered on the ISO employee dishonesty form, I think this loss is covered. Do you agree?
Ohio Subscriber
The denial is correct.
The employee dishonesty policy insures against the loss of property, including money, through employee dishonesty. An “employee” must cause the loss. The 4/97 edition of the crime provisions (CR 10 00 04 97) specifically excludes leased employees from the definition of “employee” (although temporary employees are included within the definition). The 6/95 edition of the crime general provisions (CR 10 00 06 95) provides coverage for leased employees
Thus, regardless of which edition is attached to the insured's policy, the loss would be excluded.
ISO does offer an endorsement that adds leased workers to the definition of “employee.” Endorsement CR 50 10 04 97 extends the employee dishonesty coverage to losses caused by leased workers. It would trigger coverage in the situation you describe in the absence of other exclusionary language.
Since the perpetrator is not an “employee” in this situation, we might consider if another crime form would apply. The theft, disappearance, and destruction coverage form C (CR 00 04 10 90) covers losses caused by individuals who are not employees. However, exclusion h. on CR 00 04 voids coverage when the loss is “induced by any dishonest act to voluntarily part with title to or possession of any property.”
Since the owner gave the leased worker the expense money, it appears that exclusion h. on this form would void coverage.