The insured mistakenly paid seven of his former sales employees more sales commission that he should have paid.

When the insured discovered his error, he tried to collect from the employees the amount of sales commission that was paid in error. However, the seven employees refused to give the money back. The employees no longer work for the insured.

Now the insured is claiming a loss under the Employee Dishonesty Coverage Form CR 00 01 1090 for the amount of sales commissions paid in error to the former employees.

We believe that there is no coverage for this claim. The loss originated when the insured voluntarily and erroneously paid more sales commission than he should have paid. The employees did not commit dishonest acts with the manifest intent to cause the insured to sustain a loss. The money was given to them by mistake by the insured.

Is this loss covered?

Puerto Rico Subscriber

You are correct in that the insured made a mistake and that the employees did not commit a dishonest act. While the honorable thing to do may have been for the former employees to give back the money, the funds were given to the employees and they are under no obligation to correct the insured's error. There is no coverage for this loss.

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