Insuring your company from employee theft is a unique form of coverage, different from loss caused by fire, flood, or even break and entry. Very few executives understand how it works, which is why so many legitimate claims are rejected each year.
If your facility is damaged by fire, water or forced entry, the physical evidence is apparent. It is essentially a matter for the insured to document the damage, tally the destroyed or missing inventory, and notify the insurance company. When it comes to documenting internal theft, however, you’re dealing with significantly different variables.
To begin with, your alarm system will not be going off in the middle of the night providing you with immediate notification that you’ve been victimized. Internal theft is a silent predator, normally taking place for months, and sometimes even years, before management becomes aware of its existence.
Another difference is the lack of readily available physical evidence that clearly proves the loss was caused by dishonest personnel. Most firms come to the realization that they are missing product only after receiving troublesome inventory reports or a confidential tip. Some warehousing executives wrongfully assume that inventory loss is the result of an operational problem, such as a software glitch, product mis-selections, or counting errors by inventory personnel, and the theft continues.
When management finally does become convinced that their loss is dishonesty related, they are faced with the difficult task of uncovering and documenting it. Unfortunately, this is not simply a matter of taking photographs of for example, water-damaged inventory. After all, it is hard to photograph product that has vanished.
It is safe to say that your insurance company will not be running to your door with a check simply because you notify them that you’ve been victimized by internal theft.
Most policies state that an insured must provide independent proof, in addition to a profit and loss statement, or inventory report, that corroborates that the theft was, in fact, committed by company employees. Consequently, the firm incurring the loss has the responsibility of performing an investigation and compiling evidence that proves that one or more employees stole the missing inventory. Without this independent corroboration, your financial computations alone simply will not count for much.
When properly prepared, and in conjunction with accurate financial computations, these forms of corroboration put the odds in your favor of having an inventory theft claim honored by your insurance company.
Undercover Reports – Factual observations made by a professional investigator working alongside company thieves.
Video Evidence – New technology makes it possible to conceal cameras inside smoke detectors, sprinkler heads and wall clocks, virtually undetectable.
Covert Surveillance Reports – Investigators who witness employees removing product from your warehouse or truck drivers delivering product to unauthorized locations.
Admissions of Guilt – Confession statements must be properly prepared and witnessed so it is clear that dishonest workers made their admissions without any duress, undue influence or coercion of any type.
