Image
Icon

Directory

IconAppraisers and Valuers
IconAssociations and Institutes
IconBBBEE Consulting and Verification Agencies
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconDefensive Driver Training
IconEmergency Medical Rescue
IconInsurance Brokers - Alphabetical Listing
IconInsurance Brokers by Type of Product or Service Needed
IconInsurance Companies
IconInsurance Consultants
IconLightning Damage & Surge Protection Specialists
IconOmbud
IconOnline Quotes and Cover
IconPremium Financing
IconPublic Loss Adjustors
IconPublications
IconRating Agencies
IconRegulatory Authorities
IconRisk Finance
IconRisk Management
IconRisk Surveyors
IconSalvage Operators
IconTelephone Quotes
IconVehicle Accident Management
IconVehicle and Household Risk Inspection Services
IconVehicle Tracking
IconWellness Programs
Image
  Subscribe To »

Fake Employees and direct financial loss

Published

2017

Fri

17

Feb

 

 

 

 

 

Gina Tognocchi Stokes, Claims Handler
Camargue Underwriting Managers (Pty) Ltd

 

 

 

Theft of monies by employees is a common hazard of the business environment today and as the ever varying and inventive methods of appropriating funds from an employer increase, so does the need to insure a business against these risks.

With many products available to cover this type of risk one of the focuses of these losses is that of the insurer’s reliance on the issue of what constitutes a direct financial loss.

Direct financial loss is definable as a loss of the Insured’s own money or property.

Take the following example, “Labour R Us” is a labour broker and they outsource employees to “We Need People” and charge them a global amount based on the number of people that are stationed there, plus their fee.

Mr. X is placed at We Need People in a management position and over a period of time orchestrates the theft of approximately R500 000 using various means. The primary method of misappropriation of the funds is that Mr X creates fictitious employees whose salaries are then invoiced to We Need People by Labour are Us as placement staff. Labour R Us then pays the staff directly. When the loss is discovered We Need People looks to Labour R Us to reimburse them for the loss.

Labour R Us has a commercial crime policy which covers both themselves and their subsidiaries, and looks to their Insurer to recover the loss.

On the face of it one would believe this claim to be covered as it appears to be a loss to Labour R Us, however when we look closely, it is in fact that of We Need People.

Labour R Us outsourced its own employees to We Need People and then Labour R Us would in turn remunerate the individuals directly for the work done. Effectively, Mr. X overcharged We Need People for “ghost” employees that did not work there.

Labour R Us charged We Need People for a service and was paid for that service by We Need People.

The fact that We Need People was fraudulently overcharged by an individual employed by Labour R Us, without the knowledge of Labour R Us, does not result in a loss to the insured. There is therefore no direct financial Loss.

It is important to note these instances and to effectively understand the implications of these clauses on a loss. The insured will then be aware of the level of protection that their cover actually provides, as well as the strict circumstances in which it can be applied.

 
Source: Camargue Underwriting Managers (Pty) Ltd
 
« Back to previous page Print this page » |
 

Breaking News »

Headline Risks: Seeing the big picture

By Dale Cooper/The Risk Doctor Partnership Risk assessments are often undertaken in detail, or several assessments are conducted in different parts of an organisation, project or program. Detail may be appropriate ...
Read More »

  

Copyright in South African law

For built environment professionals   In our increasingly hyper-connected world, seemingly unrelated events can have a profound impact on a business and professional career. It is crucial for ...
Read More »

  

Hong Kong: Concerns Despite Robust Growth

By Coface, the international trade credit insurance company GDP figures show that Hong Kong’s economy expanded by 3. 8% Y-o-Y in Q2 (1. Rising asset prices and strong consumer spending, backed ...
Read More »

  

Make our roads safer and get back cash

Friday. That’s the day, according to Dialdirect, when most accidents are likely to occur in South Africa. Need something more specific? How about between 15h00 and 18h00. That’s the time that most of ...
Read More »

 

More News »

Image

Healthcare »

Image

Investment »

Image

Life »

Image

Retirement »

Image
Image
Image
Image
Image
Image
Advertise Here

From The Glossary »

Icon

Winning/(Losing) Active Style Exposures:

Indicates the active style bets that made the largest/(smallest) contribution to active returns over the quarter.
More Definitions »

 
 
By using this website you agree to the Terms of Use.
Copyright © Stoker Risk & ICT (Pty) Ltd 2004 - 2017.
All Rights Reserved.
Icon

Advertise

  Icon

eZine

  Icon

Contact IG

Icon

Media Pack

  Icon

RSS Feeds