Fear Not: The Mystery of Insurance Coverage for Criminal Losses Solved

Policyholder Advisor & Alert

PUBLISHED ON: July 1, 1998

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Aten-year employee, the Vice President of Finance, absconds with the company car and $5 million of embezzled company funds. The company immediately reports the stolen car to the insurance agent but delays reporting the embezzlement. Why?

Despite paying hundreds of millions of dollars in premiums, only 20% of the victims ever end up pursuing insurance coverage for their criminal losses. Why?

First of all, many simply do not realize their companies have insurance coverage for fraud and criminal losses. But, there are two other possible reasons: (1) the company is “embarrassed” because it might be shown that the company was “negligent” in allowing the dishonest acts to take place; and (2) the company cannot prove the “state of mind” requirements of the insurance policy: “manifest intent” and “dishonesty.” Both reasons are simply wrong!