Recently a long-term client of El Dorado contacted me regarding an incident that occurred with one of their security officers. It was being alleged, by the security company’s customer, that their officer had participated in a theft resulting in the loss of over $25,000 worth of merchandise. At this time, there have been no final determinations regarding fault. Once details were obtained from the security company owners, the incident was submitted to their general liability carrier for a defense of the claim. After reviewing the facts, the carrier has taken the position that the claim is not covered and they will not be providing a defense based on an exclusion contained on their policy.
I have evaluated the insurance carrier’s disclaimer and the liability policy, and it appears that their position is correct. As set forth in the policy, the policy only provides coverage (and a defense) to claims seeking recovery of damages because of bodily injury or property damage as those terms are defined by the policy. This particular suit, as we have discussed, does not seek recovery for bodily injury. The policy contains an endorsement which eliminates from the definition of “property damage” any alleged or actual theft by the insured or its employees. In this suit, the allegations are clear that the claimant is seeking the recovery of the value of the goods that were stolen by the employee. Therefore, the damages are not because of “property damage” and are not covered.
El Dorado specializes in insurance for security firms throughout the United States. As such, we do business with insurance carriers who write approximately 95% of the coverage for insureds who provide security services. Each of those companies place an endorsement on their polices which excludes theft by the insured or its employees from the definition of “property damage”. Much like auto or workers compensation insurance, an insured must purchase a separate policy in order to have potential coverage for this type of claim.
A Fidelity (Employee Dishonesty) bond potentially provides this type of coverage. A fidelity bond is purchased to protect employers from a loss stemming from employee theft of property or funds, especially theft of property or funds of the employers’ customers. Coverage can be purchased at incremental limits in order to satisfy any particular employers’ needs.
El Dorado has long offered fidelity coverage to all of our customers and I would like to take this opportunity to suggest that any security firm not carrying this coverage take the time to look into adding this policy to their portfolio. I cannot make a definitive statement regarding the specifics of our previously-mentioned client; however, if they had a fidelity bond in place, then the result of this incident may have been very different.
To learn more about adding fidelity coverage to your general liability policy, contact El Dorado today.