The insurance company has initially indicated that they will be denying the claim based upon the phrase “manifest intent,” inasmuch as the fidelity policy in question requires that the act must be committed with the manifest intent to cause the insured to sustain loss. The insurance company has stated that because the employee indicated he had no intent to harm his employer directly, the loss is not covered.

Virginia Subscriber

The “manifest intent” language of the fidelity policy would be inappropriately relied upon in denying coverage for the incident described.

Historically the policy provision requiring a manifest intent to harm the insured in order to trigger coverage was placed in the form to avoid payment for an employee's simple bookkeeping or other error that caused an employer loss, but did not involve employee dishonesty.

The case of National Bank of Pakistan v. Saeed A. Basham (New York, 1988) appears relevant. Here, an employee of the insured allowed a bank customer to receive immediate credit (foregoing the bank's policy requiring a waiting period) for $250,000 in checks which were later dishonored. The bank employee attempted to cover up his actions by transferring funds from a frozen Iranian account. When the bank discovered the funds misappropriated from the frozen account, they made a claim under their fidelity policy. The insurance company denied the claim, claiming the employee lacked the requisite manifest intent to cause the bank harm. The court held that the hurdle was met because the employee was aware that the bank would ultimately bear responsibility for the misappropriated funds.

The same case can be made in the loss described; the employee would have been aware that the company would ultimately bear the loss from his misappropriation of the credit cards. Finding a lacking of “manifest intent” to harm the employer from the employee's  statement that he meant no harm to his employer is an error.