Know the Uninsured Threats Your Employees Pose

Know the Uninsured Threats Your Employees Pose

Employees don’t need to hold you up to rob you blind!


Three Main Threats Employees Pose

  1. Employee Theft
  2. Discrimination Claims
  3. Directors & Officers Liability


Employee Theft

If someone breaks in and robs your store, most insurance programs cover what they steal. BUT if your employee skims out of the register, or cooks your books – there is NO COVERAGE without making some changes to you policy.

Unfortunately, employee theft is not that uncommon. Locally, I know of two businesses that both had bookkeeping staff who

If someone breaks in, its covered. Employees DON’T have to break in, some of them have keys, so they are excluded for theft!

embezzled tens to hundreds of thousands of dollars. This is the most egregious example I could find in Pennsylvania, 10.3 million stolen by a controller!

Accounting staff aren’t always the thieves, and its not always cash that walks out the door. The General Manager of the corporate restaurant I worked at had been taking frozen steaks out the back door of the store for years!


Employee Theft is excluded from the standard Commercial Property insurance coverage forms because employees have special access to your building, your inventory, and your cash.  Due to that level of access, it is really easy for employees to steal, and makes the risk of theft by employees above average.


Having thorough inventory & cash management programs that include regular audits will go a long way to preventing employee theft.

Video cameras placed in key areas can provide crucial evidence when a criminal breaks in, but they can also serve as your eyes and ears when you’re not directly supervising your staff. In addition to discouraging theft, videos of customer / employee interactions can provide great training opportunities.

Insurance IS Available

You can buy an EMPLOYEE DISHONESTY or CRIME / FIDELITY policy to provide your business protection from employees that steal. This coverage is frequently overlooked, or under-insured because business owners don’t think it will happen to them!

Start a Crime Insurance quote here



The threat of discrimination claims result from either employees, job applicants and sometimes customers (reacting to an employees actions).

  • Not appropriate office banter!

    Employees – claim a hostile work environment because unprofessional language is accepted or even
    encouraged in the workplace.  Quid Pro Quo – the claim that a manager offered a raise, promotion or other benefit in exchange for personal favors.

  • Job Applicants – claim that they were not hired for a position because of their race, religion, sex, gender identification, sexual orientation or national origin or that they were offered a position in exchange for personal favors.
  • Customers – claim the business denied services or treated them differently because of their race, religion, sex, etc. ALSO – its possible that a customer can CONTRIBUTE to the hostile work environment.

A local example in a Lancaster County, Pennsylvania, grocery store consisted of a cashier claiming a hostile work environment because a regular customer routinely made “flirty” jokes to her. Her supervisor witnessed these inappropriate exchanges several times, and never addressed the issue with the customer. The first time the supervisor learned the cashier wasn’t in on the joke was when the sexual harassment suit arrived!


There is no coverage for employment practices related liability claims or customer claims of discrimination. These types of claims are specifically excluded from the General Liability Policy.


Employees should sign to acknowledge receipt and acceptance of your employee handbooks policies and procedures

Having an employee handbook with clear rules regarding employee behavior is a must in today’s business environment.  As important as having the rules regarding non-discrimination and hostile work environments is ENFORCING those rules.

Having the rules is not enough.  When complaints are filed, disciplinary actions must be taken to ensure management is not promoting a hostile work environment.

Most importantly – DOCUMENT – DOCUMENT – DOCUMENT!

When you distribute the employee handbooks with the non-discrimination policy and the code of conduct – DOCUMENT!

If you have to take corrective action with an employee – DOCUMENT! Get signatures from both complainant and offender, particularly if it the offender wasn’t terminated, that the issue has been discussed and addressed.

Insurance IS Available!

EMPLOYMENT PRACTICES LIABILITY INSURANCE (EPLI) is available to most industry classes. Policies limits and coverage can vary wildly, so be sure to keep a few key things in mind.

  1. Defense costs are sometimes included WITHIN the limits, which means that legal fees to defend your case will erode your coverage. Be sure to ask for defense costs OUTSIDE the limits!
  2. Third Party Coverage that protects you from customer and vendor claims of discrimination is optional coverage that must be added by endorsement for an additional premium.
  3. Claims of sexual harassment are decreasing compared to claims of age discrimination in employment. If you have an aging workforce, and you don’t have EPLI, you should definitely think twice.

 Start an EPLI Quote Here


Directors & Officers Liability

The corporate officers and board of directors for a company have a fiduciary duty to manage the organization with the best interest of the shareholders in mind.  When the shareholders have serious disagreements with management, you can expect a lawsuit. These types of suits, by stakeholders against the directors and officers of a company, trigger Directors & Officers Liability coverage.

NOTE: for profit companies are not the only organizations that have this exposure. Non-profit boards may also have claims filed against them. Additionally, non-profit boards may not be as familiar with the day to day operations of the organizations they help manage.

Forward Progress or Complete Mismanagement – who knows – everyone’s smiling!?


The liability incurred by officers, trustees and directors of a company, or non-profit, falls under the professional liability exclusion on the standard General Liability coverage form.  Claims that the advice and direction promoted by the management of a company caused stakeholder harm pose a professional liability exposure.

Insurance IS Available!

Directors & Officers Liability Insurance (D&O) is available from a many insurance providers. This policy protects the managers and employees if stakeholders claim they breach their duty as stewards of the organization.

Start D&O Quote Here


What’s Next?

Every business needs good employees to function efficiently. You can make sure any of the losses I’ve described here are minimized by having thorough job descriptions, policies and procedures and an employee handbook.

Additionally, making sure you select great employees to begin with. Put together a thorough interview process that includes the appropriate background checks. Be sure to collect and follow up with references.

Even if you end up with one of the problems I’ve described here, a thorough commercial insurance package will provide coverage for a wide variety of scenarios, especially if you make sure you add:

  1. Employee Theft / Employee Dishonesty or Crime Insurance
  2. Employment Practices Liability Insurance
  3. Directors & Officers Liability Insurance

As a full service independent insurance agency, New Heritage Insurance is ready to help with any and all of your insurance and risk management needs.

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