Arent Fox’s Elliott Kroll, a partner in the firm’s insurance practice in New York, was featured in the March edition of Bloomberg Law Reports — Commercial Insurance. Elliott was interviewed for the Bloomberg Law “Q&A” feature in which leading insurance coverage practitioners were asked to discuss the applicability of the termination provision in fidelity insurance policies.

This month, Bloomberg Law asked:

Courts are split over the applicability of the termination provision in commercial crime policies. Some courts hold that the termination provision applies only if a manager becomes aware of an employee’s dishonest conduct during the policy period. (See Waupaca Northwoods, LLC v Travelers Cas. & Sur. Co. of Am., No. 10-C-459, 2011 BL 109466 (E.D. Wis. Apr. 25, 2011)). Other courts, such as the Appellate Division of the Supreme Court of New York, Third Department, have held that a policy terminates upon inception as to the particular employee, if the manager knew of prior dishonest acts at the time the policy was issued. (See Capital Bank & Trust Co. v. Gulf Ins. Co., 2012 NY Slip Op 00451 (App. Div. Jan. 26, 2012)). Which is the more sound holding?

Elliott responded, writing:

Both the Waupaca case and the Capital Bank & Trust Company case are sound decisions. They highlight the importance of focusing on policy language when purchasing crime insurance. When analyzing policy language, courts will look to wording used by other insurers which, not surprisingly, can vary significantly.

If a company has concerns concerning an employee’s actions at a prior employer, care must be taken that the crime coverage language is clear and unambiguous.

To read Elliott’s full response in this month’s Bloomberg Law Reports — Commercial Insurance, please click here.

Bloomberg Law is a real-time legal research system that integrates innovative search technology, comprehensive legal content, company and client information, and proprietary news all in one place. Bloomberg Law is a part of Bloomberg, the global business and financial information and news leader.