When a business discovers that it has suffered a financial loss as a result of being defrauded or the victim of embezzlement, there are a host of issues that require urgent attention. The discovery of the loss typically triggers a flurry of activity designed to figure out the extent of the loss and how it occurred. One task that cannot be lost amid that flurry of activity, however, is consulting the company’s insurance policies to determine what coverage may be available for the loss. While there always will be efforts to recover the loss from the wrongdoer, many times the ill-gotten gains already have been spent and such a recovery will be difficult, if not impossible. Accordingly, an insurance recovery often might be the only possible recovery that the business can make to offset its losses.
Coverage can be available from a variety of sources. Standard fidelity bonds, for example, provide coverage for losses caused by an employee’s dishonest or fraudulent conduct. Financial institution bonds may provide coverage for fraudulent conduct by the employee or a customer in the course of obtaining loans or funds from the institution. Likewise, crime coverage provisions sold in many commercial package policies provide coverage for losses resulting from employee theft and losses that result from forgery or alteration of documents.
As is the case with any type of loss that may be covered by insurance, it is important for the business to consult all of its insurance coverage promptly to determine whether, and under what policies, claims should be made. It also is critically important to carefully ascertain and follow the requirements for providing notice of the loss to insurance carriers. Many bonds or policies that provide coverage for losses caused by dishonest or fraudulent conduct contain strict time requirements governing when notice must be provided, and when a proof of loss must be submitted. Failure to adhere to these time requirements could potentially result in a forfeiture of coverage.