Make Sure Your Crime Insurance Has Got You Covered

“We represented a building that was self-managed that went to a local person for insurance advice who recommended a fidelity bond,” recalls Tara Snow, an attorney with Queens-based Novitt, Sahr & Snow. “The co-op purchased the recommended policy, except the language covered a different type of business – not a self-managed co-op.” A board member proceeded to steal money from the co-op. But in order for the co-op to collect, the policy required that the thief had to be a paid employee of the corporation. Since the culprit was a non-salaried board member, the co-op’s claim was denied.

The takeaway is that every board needs the right kind of crime insurance. And since insurance policies can be complex, boards need to have one that covers all angles if they fall victim to clever thieves, or an errant bookkeeper, or a fellow board member with light fingers. What’s best, a fidelity bond or a comprehensive crime policy?

Stephen Bedosky, a vice president at York International insurance agency, says that a good crime policy works like an umbrella. “A crime policy will also cover theft by third parties in various capacities, such as forging checks or hacking into a computer and wiping out the funds of the association,” Bedosky says. “A fidelity bond is usually something that is posted by a third party. If I steal your money, that fidelity bond will take the place of the missing money.”

“I write a crime policy, not a bond,” adds Liz Raifman, president of Liz Raifman Risk Management Services, part of the B&G Group insurance company. “A crime policy, especially with condos and co-ops, extends the coverage from employee dishonesty to things like missing money, computer fraud, forgery, safe burglary, theft, and dishonesty.”

Raifman suggests building management should take out a policy that offers coverage up to a specific amount. If that coverage does not exist, any stolen money may be impossible to recover even if a co-op or condo has coverage. “The managing agent doesn’t have the stolen money – somebody has already spent it,” says Raifman, outlining a worst-case scenario. “But if (the management company) had a crime policy, at least the money would be covered on their policy.”

Raifman says that a typical crime policy costs a condo or co-op around $1,000 per year and is based on a building’s income over the year. A recent $1,000 policy she wrote covered employee theft up to $400,000.

Finding the right coverage may seem risky in itself, but Ed Mackoul, president of Mackoul & Associates, a New York insurance brokerage, says a broker experienced in co-ops and condos will be able to make sure you are covered. “It is absolutely a necessity,” Mackoul says. “A self-managed co-op may have one person who’s in charge of the money. They have access to money and there is temptation. In most cases that is not a problem, but if you have one person who is in charge of money you can have a problem. I hate to say it, but people do steal money.”