Employee Theft / Crime Insurance Claims

Employee theft is one of those risks most business owners know exists but rarely expect to experience firsthand. After all, when you hire employees, managers, bookkeepers, or supervisors, you are placing a significant amount of trust in them. Unfortunately, the reality is that even trusted employees can commit dishonest acts, and when they do, the financial fallout can be severe. Often, employee theft losses do not come from a single dramatic incident, but instead unfold quietly over time, draining accounts, inventory, or assets before anyone realizes what is happening, and when that moment of discovery finally arrives, insurance coverage often becomes the next battleground. Crime insurance policies are supposed to provide a safety net in these situations. However, employee theft claims are among the most frequently disputed insurance claims. At Brown & Bullock, our Maryland insurance lawyers help businesses handle employee theft and crime insurance claims to maximize coverage.

What Is Employee Theft and Crime Insurance Coverage?

Employee theft and crime insurance coverage is designed to protect businesses from financial losses caused by dishonest or criminal acts committed by employees or other individuals entrusted with company assets. This coverage is commonly provided through standalone commercial crime policies or through endorsements attached to commercial policies.

While every policy is different, employee theft policies often cover direct losses of money, securities, inventory, or other property that result from acts such as theft, fraud, forgery, or embezzlement. That said, coverage is never automatic. Crime policies are highly technical, heavily defined, and governed almost entirely by the language written into the policy itself. Insurance disputes involving employee theft are resolved based on contract interpretation and applicable state insurance regulations, which means every word in the policy matters.

Businesses often assume that proving an employee stole from them will be enough. In reality, policyholders often face difficulties substantiating damages, establishing coverage and navigating exclusions.

Types of Employee Theft and Crime Losses

Depending on the policy, employee theft and crime insurance may cover a wide range of dishonest acts. Some common examples of losses can include:

• Embezzlement involving the unauthorized diversion of company funds
• Skimming schemes where employees intercept cash before it is recorded
• Forgery or alteration of checks, drafts, or financial instruments
• Fraudulent electronic funds transfers initiated internally
• Theft of inventory, tools, equipment, or other business property
• Payroll fraud, including ghost employees or inflated wages
• Expense reimbursement fraud involving false or exaggerated claims
• Collusion between employees and vendors or customers
• Computer fraud involving manipulation of internal accounting systems

Common Employee Theft Scenarios Seen in Maryland Businesses

Employee theft occurs across all industries. Some common scenarios include:

• Bookkeepers or accountants issuing unauthorized payments through accounts payable
• Retail employees removing cash and altering sales records to conceal shortages
• Office managers misusing company credit cards or expense accounts
• Construction employees diverting materials or equipment from job sites
• Healthcare employees falsifying billing records or diverting payments
• Supervisors approving fraudulent time sheets or overtime entries
• Employees exploiting weak internal controls during remote or hybrid work arrangements

Insurers frequently analyze these scenarios to determine whether the loss fits within policy definitions and whether any exclusions apply.

Policy Provisions That Impact Employee Theft Claims

Several policy provisions routinely play a central role in employee theft disputes. These can include:

• Definitions of who qualifies as an employee under the policy
• Discovery provisions that define when a loss is considered discovered
• Notice and reporting deadlines
• Exclusions for certain dishonest acts or individuals
• Policy limits and sublimits for specific types of loss
• Prior loss or known loss exclusions

Insurers may rely on these provisions to narrow coverage or deny claims entirely, even when theft is not in dispute.

Proving an Employee Theft or Crime Loss

Proving an employee theft claim usually requires more than showing that funds or property are missing. Insurers typically demand documentation tying the loss directly to a covered dishonest act. This often includes financial records, transaction histories, internal audits, witness statements, and forensic accounting analyses.

Policyholders must also establish when the theft occurred, how it was discovered, and whether it falls within the policy period. If these elements are not clearly documented, insurers may delay payment, reduce the claim value, or deny coverage altogether.

Common Reasons Employee Theft Claims Are Denied or Underpaid

Employee theft claims may be subject to partial or full denials for reasons including, but not limited to:

• Alleged failure to provide timely notice of the loss
• Disputes over whether the wrongdoer qualifies as an employee
• Assertions that the loss occurred outside the policy period
• Reliance on exclusions for indirect or consequential losses
• Claims that inadequate internal controls contributed to the loss
• Disputes over the method of calculating a loss

Calculating Losses in Employee Theft Claims

Calculating losses is one of the most contentious aspects of employee theft claims. Loss calculations are frequently impacted by the timeframe of the loss or the method of valuation of the stolen property or funds. In many cases, losses must be reconstructed using financial records and transaction histories, particularly when the theft occurred over an extended period.

Forensic accountants are often needed to determine the true scope of the loss and calculate the value of the covered loss. Brown & Bullock works closely with businesses and financial professionals to help ensure losses are accurately calculated and properly presented. By doing so, businesses are better positioned to pursue the full insurance benefits they are entitled to under their employee theft and crime insurance policies.

Contact Brown & Bullock for Help With Employee Theft / Crime Insurance Claims

If you have additional questions or require the assistance of a knowledgeable and experienced team of Maryland insurance lawyers, contact Brown & Bullock today.