Why Buy Crime Insurance?
Recently a title agency found out that the law firm they were working with to close a real estate deal had their email hacked. The cyber-criminal monitored the law firm’s emails finding out when the deal was about to close. The title agency used an email purportedly from the law firm with bogus wiring instructions to disperse funds. Later when the law firm questioned the missing funds was when the title agency discovered the error. The law firm and the title agency have inadequate coverage for this loss. Both had errors & omissions (E&O) policies, but an E&O policy does not cover theft of funds through conversion. The business owners policy (BOP) provided inadequate coverage limits for funds theft.
A law firm’s trusted office manager has a gambling problem. The office manager started using the law firm’s accounts to cover her losses. She had always meant to pay it back. Because the office manager paid the bills and reconciled the bank statements, she was able to cover it up for years. The coverup ended when an IOLTA account check bounced. This triggered an investigation by the State Bar which found that the account was short by over a hundred thousand dollars. Good news for the attorney is his malpractice policy covered his disciplinary defense costs. Bad news for the attorney was that the BOP provided a limited amount of theft coverage that did not cover the entire employee funds theft.
Crime Insurance covers financial theft losses. Expect E&O insurance to cover malpractice liability claims, not financial theft losses. Don’t expect that the theft of funds triggers a covered malpractice claim. Entities, even when told they need crime insurance, decide not to get it because they falsely feel their malpractice policy will cover. It is important to have adequate coverage when cyber-criminals and employees with sticky fingers steal funds.
One survey found that over 71% of executives in financial and professional services anticipate an increase in financial crime risks this year. Another survey found that nearly half of legal professionals reported a rise in financial crime attempts in 2023, up from 34% the previous year.
A properly endorsed Cyber Insurance policy may cover the first example because it involves a computer. But the second example of the firm with the sticky fingers employee needed a properly endorsed crime policy with adequate limits for coverage.
Contact Us for Crime Insurance Information
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
