Will my insurance cover theft by an employee if the thief has not been identified?

Q:

Will my insurance cover theft by an employee if the thief has not been identified?

A:

If you're a business owner, your company faces threats from vandals, burglars, hackers, and even your own employees. If you experience a loss as a result of employee theft and you have employee dishonesty insurance, you can recover the losses.

But what happens when you've identified the theft but not the thief? Will your insurer still compensate you for the loss?

Like most insurance questions, the quick answer to this one is: it depends on what kind of coverage you have.

You generally have two coverage options when purchasing employee dishonesty insurance, and which one you pick will determine whether theft by an unidentified employee will be covered.

Form A: Commercial Blanket Bond

The first is generally referred to as Form A: Commercial Blanket Bond. The special feature of this one is that all of your employees are covered under a single limit. That means you don't have to identify the culprit in order to get your claim paid.

The thing to watch out for with this blanket coverage is that there is only one aggregate limit. That means the same limit applies whether the theft was committed by a lone actor or by a group working in cahoots. It's a good option if you believe most employees would act alone if they chose to steal from you.

Form B: Blanket Position Bond

The second is called Form B: Blanket Position Bond. With this one, you don't need to purchase insurance for all employees. This allows you to pick a different limit of insurance for each employee. You could, for example, get a higher limit for employees who handle cash or have access to the company's banking information.

The downside, of course, is that you must identify the culprit in order to get coverage. Since not every employee is covered for the same amount, the insurer will only know how much it should pay if they know who stole from you.

A special feature of Form B is that the limits can stack. For example, if five of your employees work together to defraud to, and you have $5,000 of employee dishonesty insurance for each of them, the insurance company will cover you up to $25,000.

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Written by Jacques Wong
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Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won an Insurance Council of BC award in 2015 for academic excellence in the insurance licensing courses and educates insurance professionals through PNC Learning.   Full Bio