What can be done if an employee runs away with company’s money?

During my 35 years of experience in Insurance industry, I have come across many cases of cheating by the employees. Recently, I came to know about another case. One of the companies in Bangalore had transferred goods worth Rs.40 lakhs to their Branch at Mumbai. The manager in charge at Mumbai sold these goods in the gray market but in the books, the invoices were raised on reputed customers with a credit period of 90 days. Thus, the employee ran away with Rs.40 Lakhs.

Now the company wants to know the steps that it can take against the employee. I suggested the company to go ahead and file a cheating case in the police station and follow the legal course of action.

What the company could have done to protect their wealth is what I will be discussing in this article.

Many business enterprises are not aware about an insurance policy called ‘Fidelity Guarantee’

Fidelity Guarantee – The Policy covers financial loss suffered by the Insured (company) as a result of forgery, embezzlement, theft or fraud/dishonesty or fraudulent conversion of money or goods by the salaried employees of the insured.

Scope of the cover

• The Policy pays the actual financial loss sustained as a result of the dishonesty/fraudulent act of the employee.

• Any salary, commission, security deposit or any other money standing to the credit of the employee would be adjusted out of the claim.

• The loss is payable up to the limit specified for the employee.

• The Policy does not pay more than one claim in respect of liability/loss arising out of an individual employee’s acts.

Exclusions:

The policy does not cover any loss if

1. Arising out of suppression of fact affecting the risk at the time of affecting the policy.

2. There is any change in the circumstances or conditions of the said employment without the consent of the company.

3. More than one claim in respect of any one employee.

4. Loss arising outside India.

5. Loss due to non-observance or relaxation of system of checks and precautions.

6. Loss by an act committed subsequent to an earlier act of dishonesty/fraud and which had come to the notice of the insured / Insured’s representative/supervisor.

I have covered the basic facts about this policy without going into the deeper aspects. I suggest every company to take note of this information and cover themselves against unforeseen financial loss.

The annual premium for this policy is very low and hence even a small company can afford it.

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