Embezzlement and the Homeowners Policy

Our insured is one of those people who lost money in the Madoff scheme. Is there any coverage for the insured's loss on the HO 03 policy?

Kentucky Subscriber

Money is personal property, and the personal property coverage is named perils. Theft is a named peril but is not defined in the policy. In such instances, standard practice is to refer to a desk reference. Merriam Webster Online defines “theft” as “the act of stealing, specifically: the felonious taking and removing of personal property with intent to deprive the rightful owner of it b: an unlawful taking (as by embezzlement or burglary) of property.” Certainly Madoff's intent was to deprive the insured of funds so the lost funds can be considered stolen.

 

Remember however that special limits apply to money and securities. The limit for money is $200 and the limit for securities and accounts is $1,500. Therefore if your insured files a claim a small part of the loss will be covered, but not the entire loss.