{"id":1712,"date":"2016-07-28T22:09:12","date_gmt":"2016-07-28T22:09:12","guid":{"rendered":"http:\/\/suretyone.com\/blog\/?p=1712"},"modified":"2019-10-25T23:20:46","modified_gmt":"2019-10-25T23:20:46","slug":"what-is-a-financial-institution-bond","status":"publish","type":"post","link":"https:\/\/suretyone.com\/blog\/what-is-a-financial-institution-bond\/","title":{"rendered":"What Is a Financial Institution Bond"},"content":{"rendered":"

“Formerly known as a bankers blanket bond<\/em><\/strong>, and sometimes referred to as a fidelity bond<\/em>, the financial institution bond<\/em><\/strong> as it is commonly known, is simply an insurance policy.\u00a0 Though the term \u201cinsurance policy\u201d does not typically appear in its title, financial institutions should view a financial institution bond as just that.\u00a0\u00a0When faced with certain types of loss, financial institutions should be reviewing their financial institution bonds carefully to determine if coverage exists.<\/p>\n

As with any other insurance available to a financial institution, the financial institution bond expressly provides coverage for certain loss or causes of loss, while expressly excluding coverage for other loss or causes.\u00a0 While the financial institution bond might also be appropriately referred to as a crime bond or crime insurance, there can be coverage for issues not tantamount to crime.\u00a0 In any event, when a financial institution falls victim to employee dishonesty, theft, forgery, or fraud of any kind, for example, the financial institution bond should be considered immediately as a potential source of recovery.\u00a0 There may even be coverage for certain forms of cybercrime.\u00a0When a financial institution falls victim to employee dishonesty, theft, forgery, or fraud of any kind, for example, the financial institution bond should be considered immediately as a potential source of recovery.<\/p>\n

While financial institution bonds<\/a><\/strong> largely cover the first-party loss of the institution, the bond can also provide coverage for costs defending against claims by a third party (e.g., customers)\u00a0 alleging responsibility on the part of the institution for certain loss suffered by the third party.<\/p>\n

Even if at first glance a loss does not seem to be a loss covered under a financial institution bond, it is good practice to review the bond\u2019s provisions to ascertain if there is even the possibility for coverage.\u00a0 Not unlike other insurance policies, it may be less than clear whether coverage exists for a particular loss.\u00a0 Also not unlike other insurance policies, if the bond is unclear, or ambiguous, it may necessarily be construed in favor of coverage for the institution.<\/p>\n

Financial institutions also need to be careful when faced with a potentially covered loss.\u00a0 Failure to provide timely notice of the loss can preclude coverage in certain circumstances.\u00a0 When in doubt as to the existence of coverage, financial institutions should consider giving immediate notice to the insurer.\u00a0 Many times, the bond itself will set forth when notice should be given.\u00a0 Financial institutions should also pay close attention to the other conditions or requirements set forth in the bond, and follow them as closely as possible.<\/p>\n

To the extent an institution decides to make a claim under a bond, the institution should be mindful of any provision contained in the bond which seeks to limit the time within which the institution may bring a suit against the insurer.\u00a0 Insurance policies covering first-party loss oftentimes have contractual limitation provisions that can be construed to supplant the applicable, and likely longer, statute of limitations.<\/p>\n

Even if the insurer initially indicates that coverage exists, this does not mean that the claim will ultimately be paid, or that the full value of the claim will be paid.\u00a0 Disputes with the insurer can include disputes regarding whether coverage exists in the first instance, the applicability of exclusions, the amount of the loss, or the applicability of limits and deductibles, to name a few.\u00a0Financial institutions should not shy away from pursuing recovery under their financial institution bond<\/strong>.\u00a0 They may be surprised regarding the breadth of the coverage provided.\u00a0 When in doubt, institutions should consider making a claim, and pushing the insurer to give a clear explanation, based on the language of the bond and the law, as to why a loss is not covered.”<\/p>\n

The forgoing piece was authored by Ryan Suerth<\/a> of Murtha Cullina, LLP, a national firm offering legal services to the business community, and first appeared in\u00a0Community Banking Insights<\/a>. Thank you, Ryan!<\/p>\n

National surety leader<\/strong>, Surety One, Inc.<\/a> specializes in underwriting fidelity risks for ALL business classes. \u00a0In addition to financial institution bonds<\/a> we write fidelity bonds for TPAs, MGAs, title agencies, labor unions and other hazardous classes. \u00a0For more information visit us at SuretyOne.com<\/a>, call (800) 373-2804, or email us at Underwriting@SuretyOne.com or browse our financial institution bond menu of the following classes:<\/p>\n