Restoration Insurance: Crime Insurance – Phantom Vendor

Last week we showed how susceptible small businesses are to employee-related crimes like theft and forgery. With an average loss of over $200,000, we recommend that restoration contractors purchase a crime insurance policy.

We have found one of the best ways to explain the need for crime insurance is to talk about some of the claims similar companies have had. So the following is a real-life example of a crime claim that happened to another company.

Description of Event

The head of accounting of a construction firm approved payments to several vendors with made-up names similar to authentic vendors the company worked with. For example, he approved checks for ABC Company, a legitimate consulting firm the company worked with, and ABC Inc., a phony consulting firm he made up. After over two years, another employee finally noticed the slight difference in the two names, and the accounting employee’s scheme was discovered.

Outcome

In this case, the employee took over $500,000 from his employer.

As you can see, even with the proper controls, dishonest employees can still find ways to make off with significant money from their employers. We recommend looking at a crime policy for cases exactly like the one above.