Say a small Fulton retailer noticed something wrong with the books. Over six months, $15,000 had vanished from bank deposits. The owner trusted the employee who handled the register—someone who'd worked there for three years. When the truth emerged, the employee had been manipulating the POS system to pocket cash. The owner assumed their general liability policy would respond to the theft. It didn't.
Employee dishonesty creates a blind spot for many Central New York retailers. You hire people you believe you can trust, implement basic controls, and focus on serving customers. The possibility that someone on your team might steal seems remote—until it happens.
At the Horan insurance agency, we work with CNY retailers to address coverage considerations for employee theft and crime exposures. As an independent agency, we can discuss crime coverage options from different carriers based on your retail operation and risk profile.
This article explores how commercial crime coverage differs from general liability, the types of employee theft schemes affecting Central New York retailers, and coverage considerations for your business.
Why General Liability Doesn't Cover Employee Dishonesty
Many retail owners assume their general liability policy covers theft. This misunderstanding creates significant coverage gaps.
General liability insurance addresses third-party claims—customers who slip and fall, property damage you cause to others, or products that cause injury. It doesn't cover theft by your own employees.
Commercial crime coverage (sometimes called fidelity coverage or employee dishonesty coverage) addresses losses from employee theft. This coverage exists as either a standalone policy or an endorsement added to your business owner's policy.
Consider a scenario where a Syracuse gift shop owner discovered employee theft after an employee stole merchandise over several months. When the owner filed a claim, their general liability carrier denied it immediately. Employee theft fell outside the policy scope entirely. Without crime coverage, the $8,000 loss came directly from the business.
Understanding this distinction matters before a loss occurs. Once you discover theft, obtaining coverage becomes impossible for that specific incident.
Types of Employee Theft Schemes Affecting CNY Retailers
Employee theft takes many forms in retail operations. Recognizing common schemes helps you identify vulnerabilities in your business:
Cash Theft Methods:
- Skimming: Pocketing cash before it reaches the register
- Till tapping: Removing bills from the drawer between transactions
- Short-ringing: Charging customers full price but ringing lower amounts
- Voiding legitimate transactions and keeping the cash
Inventory Theft:
- Taking merchandise without payment
- Creating fake returns for items never purchased
- Manipulating inventory counts to hide missing products
- Transferring goods to accomplices posing as customers
POS System Manipulation:
- Processing fake refunds to generate cash
- Voiding transactions after customers leave
- Abusing employee discount privileges
- Creating fraudulent gift card balances
Digital Theft:
- Manipulating accounting software
- Altering payroll records
- Processing unauthorized transactions
- Stealing customer payment information
Say a Skaneateles gift shop discovered their trusted seasonal employee had been processing fake returns throughout the summer tourist season. The employee generated store credit, which they used to "purchase" merchandise they took home. Over four months, the scheme netted nearly $5,000 before the owner noticed the pattern during a routine audit.
For retailers accepting credit cards, employee theft intersects with cyber security concerns. Our article on cyber liability and POS security explores how digital vulnerabilities create additional crime exposure.
Internal vs. External Crime Coverage: Understanding the Difference
Commercial crime policies typically separate coverage into internal and external theft categories. Knowing which coverage you carry matters when filing claims.
Employee Dishonesty (Internal Crime)
This coverage addresses theft by your employees—people on your payroll who abuse their position for financial gain. It applies to:
- Cash stolen from registers or safes
- Merchandise taken by staff members
- Fraudulent transactions processed by employees
- Forged checks or altered financial documents
Imagine an Armory Square boutique experienced this when a seasonal worker hired for holiday shopping stole designer accessories over six weeks. The employee carefully took one or two items weekly, avoiding detection until inventory reconciliation in January. The boutique's employee dishonesty coverage responded, paying the $3,200 claim minus their deductible.
Inside the Premises Coverage (External Crime)
This addresses theft by non-employees inside your building—burglars who break in overnight or robbers who threaten staff during business hours. It covers:
- Break-ins and burglaries
- Robbery with force or threat of force
- Theft by contractors, vendors, or customers
- Vandalism resulting in property theft
Outside the Premises Coverage
This covers property theft when it leaves your location, such as:
- Cash stolen during bank deposits
- Merchandise taken during delivery or transport
- Inventory stolen from your vehicle
- Property at off-site events or temporary locations
Say a Liverpool retailer experienced this when an employee's car was broken into during a bank deposit run. The stolen deposit bag contained $2,400 in cash and checks. Their outside the premises coverage responded after the police report was filed.
Retailers participating in temporary events like craft fairs or pop-up shops should consider whether their outside the premises coverage extends to these situations. Our guide on insurance for CNY farmers markets and pop-up shops addresses venue-specific considerations.
Computer Fraud Coverage
This relatively new coverage category addresses digital theft schemes, including:
- Unauthorized electronic fund transfers
- Fraudulent payment processing by employees
- Manipulation of digital payment systems
- Email compromise schemes resulting in financial loss
As CNY retailers increasingly rely on digital payment systems and online ordering, computer fraud coverage becomes more relevant. However, this coverage often appears as a separate endorsement rather than automatic inclusion.
What Commercial Crime Coverage Typically Excludes
Crime coverage includes specific exclusions that retailers should understand:
Inventory Shortage or "Mysterious Disappearance": If you can't prove theft actually occurred—items are simply missing during inventory counts—crime coverage typically won't respond. You need evidence of actual theft, not just unexplained shortages.
Accounting Errors: Bookkeeping mistakes, mathematical errors, or unintentional miscounts fall outside crime coverage. The loss must result from deliberate dishonest acts.
Theft by Owners or Partners: Most policies exclude theft by business owners, partners, or people with ownership stakes. Crime coverage addresses employee dishonesty, not owner misconduct.
Customer Shoplifting: Theft by customers is considered a property loss (shrinkage) rather than crime coverage. This falls under your business property coverage, if covered at all. Many policies exclude shoplifting losses entirely or include them only with specific endorsements.
Consider a scenario where a Syracuse jewelry store owner discovered several pieces missing during an inventory audit. They suspected an employee but couldn't prove specific theft incidents. Without documented evidence—video footage, witness statements, or admission—their crime coverage couldn't respond to the claim.
Understanding these exclusions helps set realistic expectations about when crime coverage applies to losses.
Coverage Limits and Deductibles for Retail Crime Policies
Commercial crime coverage operates differently from general liability policies regarding limits and deductibles.
Typical Limit Ranges:
- Small retailers: $10,000 to $50,000
- Medium retailers: $50,000 to $100,000
- High-risk operations: $100,000+
Businesses handling significant cash or high-value inventory—jewelry stores, electronics retailers, liquor stores—often need higher limits. Your coverage should reflect realistic worst-case scenarios, not just average daily receipts.
Deductibles: Crime coverage typically includes higher deductibles than property coverage, often ranging from $1,000 to $2,500. Some carriers offer lower deductibles for increased premiums, while others require higher deductibles for certain coverage types.
Say a Manlius boutique chose $25,000 in employee dishonesty coverage with a $1,000 deductible. When they discovered a $4,200 theft, they received $3,200 after the deductible. The owner later increased their limit to $50,000, reasoning that a trusted bookkeeper could potentially steal far more over time before detection.
Consider these factors when selecting limits:
- Average cash on hand daily
- Typical bank deposit amounts
- Inventory value in high-theft categories
- Access levels employees have to cash and merchandise
- Number of employees with financial system access
Higher limits cost more, but inadequate coverage provides false security. The time to discover you're underinsured is before a loss, not after.
Prevention Measures That May Help Reduce Crime Coverage Premiums
Insurance carriers view retail crime risk through the lens of your internal controls. Strong loss prevention measures may result in lower premiums or more favorable underwriting terms.
Consider implementing:
Cash Handling Procedures:
- Dual-control requirements for opening and closing
- Random cash drawer audits during shifts
- Daily reconciliation procedures
- Mandatory breaks forcing register changes
- Surprise cash counts
POS System Controls:
- Individual user logins (not shared passwords)
- Transaction audit trails
- Void and refund approval requirements
- Discount use tracking
- Regular exception reports
Inventory Management:
- Periodic cycle counts
- Security tags on high-value items
- Video surveillance in storage areas
- Restricted access to stockrooms
- Receiving and shipping controls
Background Screening:
- Pre-employment background checks
- Verification of employment history
- Credit checks for financial access roles (where legally permitted)
- Reference checks before hiring
Surveillance Systems:
- Visible cameras (deterrent effect)
- Covert cameras in cash handling areas
- Recording systems with adequate retention periods
- Coverage of all entry and exit points
Separation of Duties:
- Different people handling cash, deposits, and reconciliation
- Multiple approvals for large transactions
- Segregated access to inventory and financial systems
- Regular rotation of cash-handling responsibilities
Imagine an Auburn jewelry store implemented several measures after experiencing employee theft during closing shifts. They added security cameras covering the safe area, required two-person closing procedures, and implemented daily reconciliation checks. When renewing their crime coverage, the carrier offered a 15% premium reduction based on these controls.
However, no control system eliminates theft risk entirely. Even businesses with strong procedures experience employee dishonesty. Crime coverage provides financial backup when prevention measures fail.
Retailers managing seasonal employees face heightened risk during busy periods. Our article on peak season coverage for CNY retailers explores additional considerations for businesses with fluctuating staffing levels.
How to File Commercial Crime Coverage Claims in New York
When you discover employee theft, the claims process requires specific steps:
- Document the Loss: Gather evidence before confronting the employee. This includes POS reports, security footage, inventory records, bank statements, and any other documentation showing the theft pattern.
- File a Police Report: Most crime coverage policies require a police report for coverage to respond. Contact local law enforcement and provide documentation of the theft. In Central New York, this means contacting your local police department or the Onondaga County Sheriff's Office for unincorporated areas.
- Notify Your Insurance Carrier: Report the claim promptly after discovering the theft. Don't wait until the investigation concludes. Carriers have strict notice requirements, and delays can complicate claims.
- Cooperate with Investigation: Your carrier will likely conduct their own investigation. This may include interviews with you and other staff, document review, and examination of your accounting systems. Cooperation with this process is typically a policy requirement.
- Preserve Evidence: Don't alter financial records, delete security footage, or destroy any evidence related to the theft. Carriers need access to original documentation.
- Consider Legal Counsel: Employee theft situations often involve employment law considerations beyond insurance claims. Terminating an employee for theft requires documentation and appropriate procedures. New York employment laws include specific requirements for handling these situations.
Timeline Expectations: Crime coverage claims typically take longer to resolve than property damage claims. Investigations into employee dishonesty can extend several weeks or months, particularly for complex schemes involving multiple transactions over extended periods.
Proof Requirements: You must demonstrate the loss actually occurred and resulted from covered dishonest acts. This requires documentation. Say a Syracuse retailer's claim was delayed when they couldn't provide adequate records showing which employee had access to the affected accounts. Better documentation from the start would have expedited their claim.
Coverage Considerations Specific to Central New York Retail Operations
Several factors unique to Central New York affect crime coverage considerations:
Small Family Businesses: CNY retail includes many small, family-run operations where trust-based relationships replace formal internal controls. While understandable, this creates vulnerability. Crime coverage becomes particularly important when informal oversight replaces structured procedures.
Seasonal Employees: Tourist areas like Skaneateles and Cooperstown, along with holiday shopping rushes throughout the region, lead many retailers to hire temporary staff. Seasonal workers present higher theft risk due to shorter tenure and less employee investment in the business. Some carriers adjust premiums based on seasonal staffing patterns.
Regional Market and Vendor Operations: The CNY Regional Market operates year-round with numerous vendors sharing space. Vendor operations face unique considerations regarding employee access, cash handling in open formats, and coordination with market management. Crime coverage for market vendors should address these specific operational characteristics.
Rural vs. Urban Patterns: Employee theft in rural CNY retail sometimes involves smaller amounts over longer periods, with theft going undetected due to informal record-keeping. Urban retailers face different patterns, often involving more sophisticated schemes or higher transaction volumes masking theft. Your coverage should reflect your actual operational environment.
Winter Weather Impact: Central New York's harsh winters affect staffing patterns, business volumes, and crime risk. Snow emergencies, power outages, and travel disruptions create opportunities for theft during chaotic conditions. Picture this: February's Fulton snowstorm led to a burglary at a retail shop when prolonged closure made it a target. Weather-related business disruptions merit consideration when evaluating crime coverage needs.
For broader discussion of how CNY weather affects retail operations, our article on CNY weather risk management explores seasonal business challenges.
Regional Banking Practices: Many CNY retailers still make regular bank deposits in person rather than using armored car services. This creates outside-the-premises exposure during deposit runs. The Liverpool retailer scenario mentioned earlier reflects this regional pattern. Consider whether your outside-the-premises limits adequately address your typical deposit amounts.
Working with an Independent Agency for Crime Coverage
Commercial crime coverage isn't standardized across carriers. Policy forms, exclusions, limits, and pricing vary significantly. As an independent agency working with multiple insurance carriers, we can discuss options based on your retail operation:
- Cash handling volumes and procedures
- Employee count and seasonal staffing patterns
- POS system sophistication and controls
- Inventory types and values
- Prior loss history
Different carriers specialize in different retail segments. Some offer favorable terms for retailers with strong internal controls, while others focus on small family businesses with limited formal procedures. Our role involves discussing your operation, identifying coverage considerations, and presenting options from different insurers.
Crime coverage often comes bundled with other coverages in business owner's policies, but standalone crime policies exist for retailers needing higher limits or specialized coverage. We can help determine which approach fits your situation.
Crime Coverage: Ongoing Considerations for Your CNY Retail Business
Employee theft risk changes as your business evolves:
- Adding employees increases exposure
- Implementing new POS systems creates different vulnerabilities
- Changing cash handling procedures affects risk profiles
- Seasonal hiring patterns shift throughout the year
Schedule regular coverage reviews with your insurance carrier, particularly when making operational changes. Crime coverage you purchased five years ago may not address your current business structure.
For retailers managing multiple business risks beyond employee theft—from product liability to cyber threats—our retail insurance series provides targeted information for Central New York operations. Upcoming articles will address cyber liability for POS systems and insurance considerations for pop-up shops and farmers markets.
When you discover employee theft, your immediate concern shifts to financial recovery and business continuity. Having adequate crime coverage in place before a loss occurs gives you options. Without it, you absorb the entire financial impact while managing the operational disruption.
Click the Get a Quote button below to discuss commercial crime coverage considerations for your Central New York retail business.
Topics:
