Bonding-Do You Need It?

The simple answer to this simple question is – YES!  In my 20+ years working with the courier industry, I’ve probably heard this question a thousand times.  There seems to be some mystery around the term “bonding,” and the insurance industry can be accused of contributing to the confusion.  So let’s take a step back for some clarification.

 

Do you know the difference between the following terms:  Bonding, Fidelity Bond, Employee Dishonesty; Crime Insurance, Blanket Dishonesty, Employee Theft, Dishonesty Bond?  You may have heard others as well, but these terms are often used interchangeably and consequently the definitions can vary between insurance companies.  Legal contracts or RFPs may ask your drivers to be “bonded,” which means they need to be covered for dishonesty.  For purposes of this article, let’s use the general term of Dishonesty Bond when referring to this coverage. 

 

Dishonesty Bonds are as labeled. These cover dishonest acts by an employee against the employer.  Theft by an employee is specifically excluded under Property and other insurance coverages, which is why you need a Dishonesty Bond.  Any business has the risk of an employee stealing from the company.  It may be an employee stealing stock from a warehouse or a bookkeeper stealing cash or checks, as well as other potential scenarios.  The courier industry has these same exposures and more, such as the additional risk of a courier who may steal cargo in transport, which is your customer’s property.  You’re at risk regardless whether your couriers are employees, independent contractors, owner-operators, drivers, bikers, walkers, or otherwise.

 

To protect your business, purchase a Dishonesty Bond that provides coverage for the risks associated with couriers.  Many times this can be added to a standard package policy included in your Property and General Liability insurance.   Be sure that the coverage applies to employees as well as independent contractors or owner-operators and also extends to cover property of your customers.  These features will likely require an endorsement to the standard policy, yet these are readily available in courier-specific insurance programs.

 

It is important to note that if you are aware that someone has previously committed a “dishonest act,” as defined by the Dishonesty Bond, they are no longer eligible for coverage.  Unfortunately this means you won’t have insurance coverage for that person in the future if you choose to give them a second chance.  You can mitigate the risk by maintaining proper controls.  It’s a good idea to obtain background checks for any courier that may be transporting valuable cargo or property that is easily converted to cash.  Accounting practices that minimize risk include dual signatures on checks, vacation requirements of at least five (5) consecutive days for all workers, and making sure that the person who makes deposits/withdrawals is different than the person who reconciles the bank statement. 

 

Dishonesty Bonds are available at almost any limit desired.  We can also offer limits that apply to specific customers or contracts.  Talk to your insurance agent or contact us and we will help you to understand the coverage and provide the options you need.

 

Column written by:

Jeffrey A. Ice, CIC, Senior Vice President

Oswald Logistics (www.oswaldlogistics.com)  

(440) 625-1450

jice@oswaldcompanies.com

Written: 4/1/09

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