Texas General Lines — Property and CasualtyCommercial LinesEasy
A small accounting firm discovers that a former employee embezzled $50,000 over several months by creating fictitious invoices and diverting payments. The firm's Commercial Crime policy includes 'Employee Theft' coverage. Which specific insuring agreement would respond to this loss?
- AFunds Transfer Fraud
- BForgery or Alteration
- CMoney and Securities - Inside the Premises
- DEmployee Theft
Show answer & explanationAnswer & explanation
Correct answer: D. Employee Theft
The scenario describes embezzlement by a former employee, which is a form of employee theft. The 'Employee Theft' insuring agreement within a Commercial Crime policy is specifically designed to cover losses resulting from dishonest acts committed by employees.
Why the other options are wrong
- A. This covers losses from fraudulent instructions to a financial institution to transfer funds, not direct employee embezzlement of collected payments.
- B. This covers losses from forgery or alteration of checks, drafts, or similar instruments, not direct employee embezzlement.
- C. This covers loss of money and securities from theft, disappearance, or destruction *inside* the premises, typically by external parties or unexplained loss, not employee theft.
Employee Theft Coverage
An insuring agreement found in Commercial Crime policies that covers loss of money, securities, and other property resulting directly from theft or dishonest acts committed by an employee.
- Covers internal theft by employees.
- Can be written on a 'per loss' or 'per employee' basis.
- Requires a 'discovery' or 'loss sustained' trigger.
Memory trick: Crime coverage is like a 'FISTS' of protection against internal and external threats.