Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.
Employee theft can be detrimental to any business and can come in many forms. Janitorial businesses, in particular, have an inherent risk of employee theft as employees often work alone at the client’s property with little to no supervision and access to valuables. Employee theft can start with smaller items that are easily overlooked and can quickly escalate. These types of losses are not only a financial burden, but can also tarnish the business’ reputation.
Insurance companies typically break employee theft into two categories: 1st party and 3rd party theft or crime. When an employee steals directly from the employer, it is called 1st party crime. Examples of this include embezzlement, inventory theft, theft of supplies, and more. Third party crime occurs when an employee steals property from the employer’s client or vendor. Examples of this would include stealing property from a client’s premises such as laptops, cash, etc.
It is important to note that most insurance policies do not automatically cover employee theft. Those that extend coverage typically only offer 1st party crime via an endorsement and provide lower limits than stand-alone policies.
Janitorial companies can protect themselves from theft exposure by securing a fidelity bond or business services bond, a commercial crime policy, or through obtaining a specialty enhancement endorsement which adds 1st and 3rd party crime coverage to a package policy.
A fidelity bond protects a company if employees commit theft, fraud, or other dishonest acts. Most insurance policies exclude dishonest and malicious acts which includes employee theft.
A commercial crime policy and fidelity bond are similar in some respects, but they differ in that commercial crime insurance covers a wider range of threats, while fidelity bonds offer more targeted coverage. In addition to the offerings listed above, a commercial crime policy could cover crimes by people outside of the company, including burglary, theft, and forgery.
As mentioned, a third option is purchasing a 1st and 3rd party crime enhancement endorsement to the package policy. This is typically the most cost effective; however, these endorsements are usually only available through specialty programs specific to niche industries like janitorial and typically have limited access. Rancho Mesa’s MaintenanceOne™ Janitorial Program has access to markets that provide these specific endorsements.
To discuss these options in further detail, please reach out to me at 619-937-0174 or at jhoolihan@ranchomesa.com.