This article about employee dishonesty is really an article about a policy that excludes the very claims it was purchased to cover.

It will be short, and quite simple.

Having said that, do not miss the importance of the lesson here. We all want to think the insurance we buy covers us properly, but all too often that simply is not true.

Let me begin by telling you a short story.

I recently reviewed the commercial insurance for a company that has roughly 100 employees, all of whom they classified as 1099 independent contractors rather than W-2 employees.

This company keeps property of others in their care, custody, and control as a core part of their operations. Hence, the business owner felt the need to purchase employee dishonesty insurance.

So, he called his insurance agent and instructed the agent to get a quote for employee dishonesty insurance with limits that would sufficiently cover him and his business for any such loss.

A quote was procured, agreed upon, purchased, and insurance was placed. The business owner felt confident he had made a good decision, and trusted everything was fine.

Completely the opposite was true. This is where the title of this article comes into play. The employee dishonesty policy this business owner purchased defined “employee”, but specifically stated that independent contractors were not employees.

If one of the workers classified as an independent contractor had stolen any client property, the insurer would have denied the claim. So for that business owner, he had an employee dishonesty insurance policy that did not cover him for employee dishonesty. In effect, he was paying for nothing.

You may think this scenario is uncommon, but it is surprisingly quite common. There are excavation companies with earth movement exclusions, restaurants with no coverage for food poisoning or spoiled food if their freezers go out, healthcare providers who have exclusions for bacteria and fungi that cause illness, sausage makers with no coverage for product recall due to contamination, gymnastics programs with trampoline liability exclusions, and the list goes on.

Sometimes the bad stuff is glaring and obvious. Other times it is buried in fine print and you have to really dig, but it is almost always there in one form or another.

Furthermore, in this business owner’s case the limits provided were only sufficient to cover a small fraction of the value of others’ property that could have been stolen by one of the workers. Therefore, even if a really crafty attorney somehow forced the insurer’s hand in relationship to coverage the business would still likely be out-of-pocket for a significant portion of the loss because of insufficient limits.

Obviously, the agent in this case had no idea that the policy failed to properly cover the business owner. The agent did as they were instructed, and got the business owner the policy they requested with a reputable insurer at the best possible premium. That just serves to underscore the fact that you can have a great agent and still have major issues with your coverage.

I wish this story were limited to the one occasion and a single line of insurance, but unfortunately I find issues like this in almost every policy I review.

Be careful what you buy, and who you take your insurance advice from.

To Your Success,