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Does business insurance cover Fraud by employee/shareholder

Madison, WI |

We have a partner that embezzled hundreds of thousands of dollars and when found out he was fired and taken to civil court. This lawsuit will bankrupt him so will business liability insurance cover this loss? It is clear that he was in charge of the finances and he skimmed money and did not pay our subcontractors. We are a "S" Corp.

Attorney Answers 3


You are about to be introduced to your insurance carrier's "coverage counsel," who no doubt will say you're not covered. You need to get a business litigator with insurance expertise on this immediately to look over the policy.

Another thing to think about - do you have a fidelity bond in place? If so, you need to make claims on that.

The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.

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The truthful answer is 'it depends' on whether or not the Business Insurance policy was written to cover that type of loss. I'd make a claim for it after consulting with the Litigation attorney handling the case against him. He may also have insurance - separate from the business - that might afford a recovery as well. Good Luck!

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Atty. Potter is correct. It all depends upon the precise language in the insurance policy. You need a lawyer versed in reading insurance policies in business situations.

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