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Question for insurance bonding experts.

Old 09-05-2015, 06:42 AM
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Default Question for insurance bonding experts.

Can someone with insurance bonding experience explain how difficult it to collect on an insurance bond. It has been determined the former treasurer of our yacht club has stolen at least $50,000. This was determined by hiring a forensic account ($5000 so far) to review the books for the last several years. It is not a complete audit and it would cost many more thousands to do a complete audit. There is a debate whether to allow restitution or just file the claim and let the bonding company deal with it. Of course they are not going do do complete audit which would most likely increase the amount of the claim. Some say the bonding company will drag us thru the mud and cost us more than we would collect. Any bonding experts have an opinion as to how to proceed. BTW the policy has a $1k deductible with a $150k limit. Thanks.
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Old 09-05-2015, 07:06 AM
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They won't 'drag you thru the mud' but will need something showing that the money was stolen and how much. If you can agree on a figure and the ex treasurer is willing, restitution would be easier and cheaper. The only problem is that his/her attorney would ask for immunity from prosecution as part of the agreement and you probably don't want to give up that option. JMHO
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Old 09-05-2015, 07:18 AM
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If you file criminal charges (which you should) won't the police examine the books for you? I would be more concerned about holding him accountable than getting the money back but in this case since you have insurance you can do both.

Why wasn't there an outside annual audit done?
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Old 09-05-2015, 08:43 AM
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Originally Posted by mikefloyd View Post
If you file criminal charges (which you should) won't the police examine the books for you? I would be more concerned about holding him accountable than getting the money back but in this case since you have insurance you can do both.

Why wasn't there an outside annual audit done?

The former treasurer is being given the chance to make a one time full restitution payment to avoid prosecution. I myself would file the claim and let the bonding company take whatever action the want to recover the funds from the former treasurer.

The was an annual audit done by an outside firm however they were only asked to review whatever info they were given by the former treasurer. I know kinda pointless. Garbage in, garbage out.
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Old 09-05-2015, 09:08 AM
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Without knowing the specifics of the bond in place, I can only speak in general terms. A bonding company is to be distinguished from an insurance company. A bonding company does not defend its insured. It does not investigate and settle claims. It is only after a court judgment is obtained that the bond serves as a financial resource from which to collect that judgment from an otherwise uninsured and judgment proof (no assets) judgment debtor.
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Old 09-05-2015, 12:46 PM
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Originally Posted by Pez Vela View Post
Without knowing the specifics of the bond in place, I can only speak in general terms. A bonding company is to be distinguished from an insurance company. A bonding company does not defend its insured. It does not investigate and settle claims. It is only after a court judgment is obtained that the bond serves as a financial resource from which to collect that judgment from an otherwise uninsured and judgment proof (no assets) judgment debtor.
You are generally correct regarding bonds but a dishonesty bond is handled like regular insurance. If they file a claim, they will have to show proof as with any other claim, the insurance company will investigate with their own forensic accountant, and they will pay whatever amount is proven subject to policy conditions and limits.
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Old 09-05-2015, 01:23 PM
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Good to know, I've never encountered that type.
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Old 09-05-2015, 01:52 PM
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Originally Posted by Shag View Post
You are generally correct regarding bonds but a dishonesty bond is handled like regular insurance. If they file a claim, they will have to show proof as with any other claim, the insurance company will investigate with their own forensic accountant, and they will pay whatever amount is proven subject to policy conditions and limits.
This makes sense. We go to the end of the earth to uncover everything and they're accountants try shot down as much as possible in order to pay as little as possible. Meantime we continue to pay a forensic accountant and run up a bigger tab fighting the insurance company. About what I would expect.
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Old 09-05-2015, 02:20 PM
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Originally Posted by hottoddie View Post
This makes sense. We go to the end of the earth to uncover everything and they're accountants try shot down as much as possible in order to pay as little as possible. Meantime we continue to pay a forensic accountant and run up a bigger tab fighting the insurance company. About what I would expect.
The claims I have seen haven't been a fight but can be a PITA just finding everything.
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Old 09-05-2015, 03:20 PM
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Originally Posted by Shag View Post
You are generally correct regarding bonds but a dishonesty bond is handled like regular insurance. If they file a claim, they will have to show proof as with any other claim, the insurance company will investigate with their own forensic accountant, and they will pay whatever amount is proven subject to policy conditions and limits.

This sounds like Directors & Officers rather than a performance issue.

Directors & Officers Liability

Coverage for defense costs and damages (awards and settlements) arising out of wrongful act allegations and lawsuits brought against an organizations board of directors and/or officers.
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