Broker Check

If You Hire the Formerly Incarcerated, Does Your Crime Insurance Cover Them?

July 28, 2021
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Crime insurance is an often overlooked but necessary part of any organization's insurance program. Companies looking to expand their work force may be more prepared to hire individuals with  a criminal history. Many jurisdictions now have "ban the box" rules that you cannot inquire about a prospect's criminal background before making at least a conditional offer. Employers may want to diversify their workforce, or give  ex-offenders a second chance.

Whatever the motivation, companies should have crime insurance in place, specifically employee theft insurance (formerly called employee dishonesty) to cover the risk of employees' criminal acts. However if you read your policy's Crime form you may find that ex-offenders are not covered.

Most forms have a "cancellation as to any employee" condition which states coverage for any employee is cancelled immediately upon discovery by an insured, partner, member, officer, director or trustee not in collusion with the employee of theft or any other dishonest act committed by the employee before or after employment.

In other words: once your hiring manager, human resources director or any other responsible person knows a new hire has committed a dishonest act, THE EMPLOYEE IS NOT COVERED. It doesn't matter whether the act was grand theft or petty larceny, or whether it happened five, ten or twenty years ago and the offender served time and has not repeated the crime. There is no coverage.

Some insurers have modified this condition to only apply to crimes over a stated amount, which can be as much as $25,000. However, there is no "statute of limitations" in crime insurance that would provide coverage once a period of time has elapsed since the offense.

If you have or are planning to hire ex-offenders as employees, read your Crime form to see what coverage if any you have for them.