Employee Dishonesty Coverage

Managing an apartment building or a condominium association involves trusting employees and contractors with access to property, finances, and sensitive information. Unfortunately, sometimes this trust can be misplaced. Employee dishonesty—such as theft, fraud, or embezzlement—can lead to significant financial losses for property owners and associations.

This is where Employee Dishonesty Coverage plays a crucial role.

What Is Employee Dishonesty Coverage?

Employee Dishonesty Coverage is a type of insurance designed to protect businesses and organizations from financial loss caused by dishonest acts committed by employees. These acts include:

• Theft of money or property
• Embezzlement or fraud
• Forgery or alteration of financial documents
• Theft of securities or confidential information

For apartment building owners and condominium associations, this coverage safeguards against internal threats that could otherwise be financially devastating.

Why Is It Important for Apartment Building Owners and Condo Associations?

Apartment buildings and condo associations typically handle significant cash flow from rent, association dues, maintenance fees, and reserves. Employees such as property managers, maintenance staff, bookkeepers, and even contractors might have access to these funds or assets.

Without Employee Dishonesty Coverage, if an employee steals money or property, the loss must be absorbed by the owner or association—potentially harming financial stability and eroding trust within the community.

How Employee Dishonesty Coverage Works

• Coverage Limits: The policy specifies a maximum amount it will pay per occurrence or annually for dishonest acts by employees.
• Covered Parties: It applies to current employees and often to former employees within a certain timeframe after their departure.
• Claims Process: If an employee commits theft or fraud, the owner or association files a claim with their insurer to recover the lost funds, subject to policy terms and limits.

Examples of Employee Dishonesty Claims

1. Embezzlement of Association Funds

A condo association’s bookkeeper secretly diverts monthly dues into a personal account over several months. The association discovers the fraud during an audit. Employee Dishonesty Coverage reimburses the association for the stolen funds.

2. Theft of Rent Payments

An apartment building’s front office staff accepts rent payments but pockets the cash without recording the transaction. The landlord notices discrepancies in financial records. The insurance covers the losses due to the employee’s theft.

3. Forgery of Checks

A maintenance supervisor for a condo association forges the manager’s signature on checks to pay for personal expenses. The association files a claim to recover the lost money under Employee Dishonesty Coverage.

Additional Considerations

• Background Checks and Controls: While insurance provides financial protection, good hiring practices and strong internal controls (segregation of duties, regular audits, dual signatures) help reduce risk.
• Policy Exclusions: Coverage may not apply to owners or partners who commit fraud. Make sure to review policy details carefully.
• Separate Policy or Endorsement: Employee dishonesty coverage may be part of a Commercial Crime Policy, an endorsement on a BOP, or a standalone policy.

Final Thoughts

Employee dishonesty can severely impact apartment building owners and condo associations—both financially and reputationally. Having Employee Dishonesty Coverage is a smart and often essential way to protect your property’s finances and maintain community trust.

If you manage or belong to a condo association or own rental apartments, consult with your insurance agent to ensure you have appropriate employee dishonesty protection tailored to your specific needs.