Gareth Milner, managing director of professional risks at J.M Glendinning (Insurance Brokers), on the benefits of commercial crime insurance:
It’s no secret that there are many unfortunate cases where a law firm has inadvertently transferred funds to a fraudster, or where an employee has nefariously taken sums of the firm’s money over a period of time.
While your professional indemnity (PII) policy will step in to cover losses that involve theft of a client’s funds, your PI insurers are not obliged to pick money belonging to the business.
If company funds are misappropriated, many firms find themselves without cover, or having to rely on much smaller inner limits of cover from an office policy or a cyber policy. These policies are unlikely to be sufficient for companies that hold significant amounts of money in their business accounts; for those it may be worth considering a commercial crime policy.
Commercial crime insurance protects against financial losses stemming from business-related crime, including employee theft, forgery, robbery, and electronic crime. While strong risk management protocols can help a business avoid fraud, dishonest employees and external fraudsters can circumvent the security of even the most well-run companies, leading to potentially substantial financial losses.
Although employees remain the greatest area of concern for organisations, a commercial crime policy can also cover losses caused by specific acts of non-employees, including:
- Fraudulent manipulation of the company’s computer system, including a hacker transferring funds to an outside account.
- Fraudulent electronic funds transfer instructions sent to the company’s bank purporting to be from the company.
- Theft, damage, or destruction of money, securities, and/or other property both on the insured’s premises or elsewhere (for example, while in transit).
- Forgery or alteration of negotiable instruments, including forging of the insured’s signature on business checks.
Social engineering fraud
The consequences of any of the above crimes can be financially devastating for companies and lead to severe reputational harm. For the right size and profile of business, commercial crime insurance is an essential part of mitigating financial risk.
Holding a separate commercial crime policy can also ensure that the claims experiences of other, arguably more price-sensitive policies as part of your programme, such as PII, cyber and directors’ and officers insurance, are protected.
If you would like discuss this topic, or any other element of your practice’s insurance and risk management programme in more detail, please do not hesitate to get in touch with me via 01943 883634 or gareth.milner@jmginsurance.co.uk.
JM Glendinning are sponsors of the Yorkshire Legal Awards 2023.
