Employee Crime Claim:
Increased Insurance Recovery for First Party Claim by 50%

Problem

A heavy equipment leasing company suffered a theft loss resulting from an employee manipulating the company’s accounting records to extend credit to personal friends after they were denied credit from the company. Upon discovering the fraud, the company terminated the employee and recovered some of its losses from the “customers”. However, the company was still left with a large loss.

The company submitted a claim to their insurance carrier under their crime policy to recover these amounts. Coverage was denied outright by the carrier.

Analysis & Results

After the denial of coverage, the company engaged LLM to assist with the valuation and recovery of the loss from its insurer. LLM reviewed the company’s insurance policy and helped convince the insurer that the loss was indeed covered under the provisions of the policy. In addition, LLM discovered that claim preparation fees could also be recovered under the policy.

LLM then reviewed the company’s accounting records to both 1) prove the occurrence of theft to meet the definition under the policy, and 2) to calculate an appropriate loss amount. Our analysis resulted in a claim value much higher than what was originally presented by the client.

Lastly, LLM worked closely with the broker to use the timing of the company’s policy renewal as leverage, allowing us to keep the carrier engaged throughout the process and to accelerate response time.

Results

LLM and the client reached a settlement amount at 50% above the client’s original internal claim valuation plus full reimbursement of LLM’s fees. The client was extremely pleased with this result, particularly given that, before engaging LLM, it had written-off the loss amounts and partially resigned itself to the possibility that it would not recover ANY insurance proceeds.

Key Take-Aways for Policyholders

• Policyholders should not expect to submit a claim against insurance and receive automatic reimbursement. Carriers will often deny coverage or significantly reduce the calculated claim value, and policyholders must expect and prepare for some, and perhaps significant, negotiation.
• A careful examination of language in your policy and a full and proper valuation of the loss are essential elements to a successful recovery.
• Brokers can be excellent advisors in the claim process. However, their most valuable role is to negotiate with the carrier from a business perspective. When claims are complicated, and even when they are not, policyholders should consider adding claim consultants and/or coverage counsel to their claim team.