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Our insured carries employee dishonesty coverage under forms CR 00 01 and CR 10 00, both 10/90 editions. The insured owns and places video game machines in various establishments. Periodically, an employee will go to the establishments to collect the money from the machines. The insured pays the establishments a percentage of the take after it is removed from the machines and counted. Only the insured's employees have access to the money in the machines.

One of the insured's employees went to several establishments, took the money out of the machines, and then walked off with it. No part of the money was given to the establishments before the employee took off with it.

The insurer wants to pay only for the percentage of money the owner of the machines is entitled to through its agreements with the establishments in which the machines are placed. We believe the entire amount of money stolen should be paid under the employee dishonesty policy. What is your opinion?

Ohio Subscriber

The entire amount of money that was stolen by the employee is payable under the employee dishonesty form.

The commercial crime conditions read as follows:

Ownership of Property; Interests Covered

The property covered under this insurance is limited to property:

A. That you own or hold; or

B. For which you are legally liable.

However, this insurance is for your benefit only. It provides no rights or benefits to any other person or organization.

The caution that the policy “provides no rights or benefits to any other person or organization” means that the establishments in which the machines are located do not have direct rights under the policy. It does not mean that the percentage eventually owed to them is excluded from coverage.

While the establishment in which the machines are placed have no direct rights under the policy, the money that was stolen by an employee was, at the time of the loss, money that was owned or being held by the insured. Thus, the entire amount of the loss is owed.

 

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