Q

My client has a business covered by a standard commercial crime policy. The policy includes coverage form A, employee dishonesty, and coverage form C, theft, disappearance and destruction.

Not long ago an employee was “tricked” into giving a large sum of money — the daily deposits — to a supposed security guard. No witnesses saw the guard, and no other businesses in the area had such a loss. The employee has since refused to take a lie detector test. She has also filed a workers comp claim, citing stress from this incident. She told the doctor a gun was involved, but has later denied there was a gun.

We feel this loss should be covered, but are unsure how to proceed. How does my client prove there has been a loss? As a matter of interest, in explanatory material accompanying the policy, the company states “loss which results from an insured…being induced by any dishonest act to voluntarily part with title to or possession of money or securities is not covered. This implies employee dishonesty which is not within the scope of this form.”

What are your thoughts? If the explanatory material is correct, then shouldn't the carrier have to prove the employee took part in the loss under form A?

California Subscriber

A

In the case you describe, the burden of proving the loss falls on the insured. The explanatory material is simply that — explanatory material, and should not be considered part of the contract. The explanatory material alludes to “trick or device” whereby an employee is induced to part with property; it cannot always be deduced that the employee was therefore a willing participant. The effect of the exclusion, however, is to preclude coverage for the loss under form C.

The insured may make a claim under coverage part A, but must establish the loss through filing charges, or some such action. If nothing is done other than to report a loss, the insurer could suspect collusion.

The policy makes the requirement that the insured must cooperate with the insurer in event of a loss. It appears that proof of the loss will lie in full investigation.