What is Employee Dishonesty Coverage?
Employee Dishonesty Coverage, also known as employee theft insurance or fidelity coverage, is a type of crime insurance that protects your restaurant from financial losses caused by fraudulent or dishonest acts committed by your employees. Covered acts typically include theft of money, inventory, or property; embezzlement; forgery; credit card fraud; stealing customer payment information; manipulating books or records to conceal theft; stealing from the cash register or safe; taking inventory or supplies for personal use; and fraudulent processing of credit card transactions. This coverage can be purchased as a standalone policy or added as an endorsement to your commercial property policy or business owner’s policy. Claims are typically paid after you’ve proven the loss occurred, identified the dishonest employee, and cooperated with law enforcement investigations.
What you need to know
Employee Dishonesty Coverage provides financial protection against internal theft and fraud committed by your own employees, which standard property insurance policies typically exclude.
Common dishonest acts covered:
- Theft of money – Cash stolen from registers, safes, or deposits
- Embezzlement – Systematic diversion of funds over time
- Forgery – Falsified checks or financial documents
- Credit card fraud – Fraudulent transactions or stolen card information
- Inventory theft – Taking food, alcohol, or supplies for personal use
- Record manipulation – Altering books to conceal theft
- Fraudulent processing – Fake refunds, voids, or discounts to pocket money
Where you get this coverage:
Employee Dishonesty Coverage can be purchased as a standalone crime insurance policy or added as an endorsement to your commercial property policy or business owner’s policy. Coverage limits typically range from $10,000 to $100,000 or more depending on your needs.
Claim requirements:
To file a successful claim, you typically need to prove the loss occurred, identify the specific dishonest employee responsible, provide documentation of the theft, and cooperate with law enforcement investigations. Most policies require you to report the theft to police and pursue criminal charges.
Why it matters for Restaurant Owners
Employee theft is a significant problem in the restaurant industry, with studies suggesting that internal theft accounts for billions of dollars in losses annually across all restaurants. Your employees have access to cash registers, safes, inventory, payment card information, and accounting systems, creating numerous opportunities for dishonest employees to steal from you.
Common employee theft schemes in restaurants:
Restaurant employees engage in various theft schemes including:
- Pocketing cash payments without ringing them up in the system
- Giving free food to friends and family without authorization
- Processing fraudulent refunds or voids to pocket the difference
- Stealing bottles of expensive alcohol from inventory
- Taking expensive ingredients home for personal use
- Skimming credit card information from customers
- Manipulating timecards to get paid for hours not worked
The scope of the problem:
Many restaurant owners discover these losses too late, often only after thousands of dollars have been stolen over months or years. Small, consistent theft can go unnoticed until a thorough audit reveals the extent of the losses.
Why recovery is difficult without insurance:
Without Employee Dishonesty Coverage, you would have no insurance recovery for these losses, even though they can be financially devastating. While you could try to recover stolen funds through criminal restitution or civil lawsuits against the employee, most dishonest employees have no assets to collect from.
What this coverage provides:
This coverage ensures you can recover at least some of your losses and continue operating, though you’ll typically need to have solid evidence of the theft and cooperation from law enforcement to file a successful claim. The coverage helps protect your business from the financial impact of internal theft, allowing you to focus on running your restaurant rather than absorbing devastating losses from employee dishonesty.