Let’s talk FIDELITY GUARANTEE cover. Looks and sounds straight forward, right? Covers theft of cash and/stock by employees, right? Not quite.
There’s something called systems&Procedures warranty which states that “the insurance company shall not be liable in the event of the insured not observing as far as is practicable the systems of checks in operation”.
So in this scenario, we have an insured operating a forex bureau where the procedures in place require the manager to counter check all cash going into the safe and sign on a register. The manager flouts this and over 2M is lost when insured finally reviews books and finds that the manager colluded with the tellers to pick off cash so that over a 3+week period there is no check of actual cash out and back to safe.
The question is therefore this, if there is a procedure in place that must be adhered to for the claim to be admissible, do we expect a fraudulent manager to comply? Can such a client be punished by the application of this warranty? One school of thought is that there should be oversight of the manager through audits and checks while the other school of thought is that a manager charged with enforcing the processes goes bad then nothing much the insured can do. It gets tricky here. Do you need an insurance expert?
At Imana Insurance Kenya, we speak fluent insurance
Raymond Momanyi is the CEO Imana Insurance Agency Kenya Ltd www.imana.co.ke