November 1, 1997

3 Min Read
Protecting Yourself Against EmployeeDishonesty

Protecting Yourself Against EmployeeDishonesty

Employee dishonesty insurance, sometimes referred to as crimecoverage, is one type of insurance that may be as essential forprotecting your self-storage business as fire or liabilityinsurance. Dishonesty losses in the United States are known to bein the billions of dollars each year, and employee theft standsas one of the most under-reported crimes affecting businesses. Infact, more money and property are stolen annually by trustedemployees than by all of organized crime.

One compelling reason for securing crime insurance is thatemployee dishonesty losses are excluded from coverage undervirtually all commercial property policies. Fortunately, employeedishonesty coverage is available from many specialty insurers atvery reasonable rates. When you compare the potential losses youmay suffer from employee theft with the very affordable cost forthis coverage, crime insurance becomes a prudent investment forconcerned self-storage facility owners.

Unfortunately, dishonesty insurance is often overlooked bymany self-storage facility owners who prefer not to be suspiciousof the people working for them. The fact of the matter is thatyour most trusted employees are in the best position to use theirknowledge of your business operations to steal or embezzle fromyou.

What can you do to protect yourself from employee dishonesty?The best available defense includes implementing strict operatingcontrols in combination with careful employee supervision--andsecuring adequate insurance protection. The focus of this articleis to provide a brief overview of commercial crime exposuresfacing self-storage facility owners and the coverages availableto protect yourself against them.

Crime coverages can be tailored to fit the size and scope ofyour self-storage operations and can protect you against suchlosses as robbery, burglary, theft, embezzlement and more. Inmost cases, your business-property and liability package policycan be endorsed to provide coverage against employee dishonesty,the loss of money and securities from your premises, and the lossof other covered business property such as computers or officefurniture. Keep in mind that covered items may also include theproperty of others for which the insured is liable, so you willbe covered in the event that an employee was to steal from one ofyour customers.

Employee dishonesty insurance can be written in two ways: as ablanket-coverage policy or as a scheduled-coverage policy. Withblanket coverage, the limit of insurance applies to each loss, nomatter how many employees caused the loss and whether or not anywere caught and identified. With scheduled coverage, the limit ofinsurance applies per employee, who must be specificallyidentified (either by name or title) in the policy declarationsand who must be identified as the person(s) causing the loss.

Although scheduled coverage might appear to be more desirablethan blanket coverage, that is not always the case. Scheduledcoverage is usually much more expensive than blanket coverage forany given number of employees, and the per-employee limit of ascheduled coverage form applies only to those employees that canbe precisely identified as the perpetrator(s) of a dishonest act.

One very important point concerning employee dishonesty claimsis that "dishonest acts" must be committed with"manifest intent." In other words, a loss resultingfrom an unethical act, such as lying, must be due to the employeeseeking personal gain. Without manifest intent such claims wouldbe disallowed. Also, inventory shortage claims are excluded fromemployee dishonesty policies, because losses can occur from avariety of reasons besides theft, such as accounting errors.

Money and security claims, and business-personal claims arenot the only losses that can be covered under employeedishonesty. Riders are available to protect you against checkforgery, credit card misuse and computer fraud/theft ofinformation to supplement your existing protection at extra cost.

In addition to implementing security controls and procedures,several commonsense measures can help minimize your risk oftheft. Checks should be immediately stamped "for depositonly," for example, and invoices should always be stamped"paid" to circumvent the chances of paying the sameinvoice twice. Fidelity bonds are also available that can giveyou added protection. However, for true peace of mind, it'sprobably best to expand the value of your insurance by purchasingdishonesty insurance. Consult your insurance agent for completedetails. *

David Wilhite is marketing director of Universal InsuranceFacilities Ltd. Universal offers a complete package of coveragesspecifically designed for the self-storage industry, includingloss of income, employee dishonesty, comprehensive businessliability, hazardous-contents removal and customer storage. Formore information, contact Universal at Box 5400, Scottsdale, AZ85261-9957; phone (800) 844-2101; fax (602) 970-6240;

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