Fidelity Insurance – Employee Dishonesty

Fidelity insurer’s employee dishonesty exclusion does not automatically apply when executives take out $5.4M in fraudulent loans for their personal benefit (5th Cir. Fed.).

The Federal 5th Circuit Court of Appeals found that a fidelity insurance policy may have to respond when executives take out a $5.4M in fraudulent loans under their company’s name and keep the proceeds despite an exclusion in the policy for employee dishonesty.  The question is whether or not the funds were actually received by the company by virtue of the executives acting with apparent authority  and then converted, in which case the loss was a theft from the company and thus covered.  BJ Services v. Great American, 2013 WL 4779701, Case No. 12-20527, 9/6/13, U.S.C.A. 5th Cir.


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