Flickr Photo Credit: MeijerGardens

It takes just a cursory glance at the news to realize that many organizations have been victims of crime perpetrated by their employees or board members. Tales of treasurers absconding with funds, board members accused of bid rigging, or groundskeepers pilfering equipment abound. There are also numerous incidents of residents, property visitors, or neighbors causing damage or stealing property. There’s no excuse – condo and homeowner associations need crime coverage.

While typically associations purchase fidelity bonds – coverage that responds to employee embezzlement, forgery, or theft – this coverage does not respond to the acts of outsiders not covered specifically under the bond. Also not covered is theft of a client’s property while in the association’s “care, custody, or control.” So if association fees paid are stolen by an outsider from the company vault, fidelity bonds will not respond.

However, most insurers offer optional insurance to cover crimes not covered on fidelity policies. They include:

• Computer fraud
• Extortion
• Forgery/alteration
• Client property liability
• Robbery/burglary
• Theft, disappearance, and destruction

Even with such coverage, policies often limit the amount of loss covered. For example, if a visitor to the property is stealing cars over a 2-year period, some policies will cover the acts, but possibly only to the limits on the current policy. In other words, if the theft amounts to a total of $2,000,000 and the policy limit for the current year is $1,000,000, the insurer may only pay up to the $1,000,000 limit. The previous year’s losses may have to be absorbed by the association. The same holds true for acts committed under a fidelity bond.

Do you know if your association is covered?  Let’s talk and find out what limits exist on your current coverage.

I mean we’ve all heard stories about the waiters and waitresses at our favorite restaurant swiping our credit card numbers on a little theft gizmo before running the charge through for the meal.  I’ve actually been a victim of something similar.  Although I love the restaurant dearly (it serves the best Mexican food) I only pay with cash. period. 

Every month large sums of money moves through your books.  Rents come in as income, and then there are expenses – utilities, maintenance, staff, supplies, insurance, taxes, advertising, legal fees, tenant damage, etc.  Do you have safeguards in place to deter sticky fingers?

Do you have one person write checks and another person sign them?  Who reconciles the bank statement each month?  Direct theft is one form of employee dishonesty. 

Another form would be when an employee uses tenant information – credit card numbers, social security numbers, birthdates, etc. to make fraudulent purchases for personal gain.  This form of theft is more difficult to identify.  And yet, you could be named as a party in the lawsuit.

All forms of theft are damaging – not only to the Apartment owner but to the reputation of the property and the ability to keep maximum occupancy. So, what’s the remedy?  Aside from the obvious of doing everything yourself, which assumes you’re an honest person, is to have certain policies in place.

1.  Bond your employees.   Fidelity bonds protect you (the policyholder) for losses incurred as a result of theft or dishonesty by the bonded employee.

2.  If your business is a corporation, LLC, etc. you should have Directors and Officers (D&O) liability insurance in place.  This coverage will protect the organization from legal/litigation costs resulting from mistakes (yes, that’s a broad term) for which they are liable.

3.  Is it a standard part of your application process for prospective tenants to provide proof of tenant/renter’s insurance?  What about the maintenance person or exterminator who likes bright shiny objects?  Proof of tenant/renter’s insurance should be standard for all approved applications.

When you protect your business, you’re protecting others from losses that can and will occur.  Legal fees and shattered reputations can ruin a business.  Be proactive and have policies (employer and insurance) in place to deter dishonesty and prevent holes in your office.