The Big Deal About Employee Theft Coverage

On June 10^th, 2021, Gary Jones, a former United Auto Workers president, was sentenced to 28 months in jail for embezzling union funds. This embezzling happened from 2010-2019. We often hear about large corporations being hit by embezzlement, but small and midsize businesses account for 68% of employee theft cases in the US.

Most businesses are not aware of an insurance coverage called Employee Theft Coverage (sometimes it is called Employee Dishonesty Coverage). This is an endorsement that provides coverage to an employer that suffers financial loss due to fraudulent activities done by an employee or group of employees. Employee theft can be in the form of forgery, money, securities, or other property that belongs to the employer or a third party (such as a client).

Many Business Owners Policies (BOP) include a bit of coverage for employee theft. The included coverage amount is usually $10,000 or $25,000. Reports from the Nations on Occupational Fraud and Abuse state the average employee theft claim costs about $150,000. This means the included employee theft coverage may not be sufficient. An Employee Theft Endorsement can be added to a BOP or similar type policy to boost the coverage.

A few exclusions to keep in mind:

Employee Theft Coverage will not cover theft committed by an owner or business partner(s). This is covered by Directors & Officers Insurance.

It will not pay for the loss of future business income.

It will not pay for the wages you paid out to the dishonest employee during the time they were stealing.

Fees or legal expenses will not be covered.