Higher Crime Limits Available for Ohio School Plan Members
There has been a lot of talk, confusion, and agonizing over developments across the state where finance clerks have embezzled funds from school districts which resulted in findings for recovery issued by the state against the clerk and the treasurer. This has resulted in the resignation of the treasurer, and the treasurer's bond company expecting reimbursement from the treasurer. When such situations occur, questions quickly follow:
- Why is the treasurer responsible when someone else stole money?
- Why won't other insurance coverages protect the treasurer in this situation?
To answer these questions, a refresher on property and casualty insurance and treasurer bonds is a good place to start. Please note that this is a general discussion. We could write volumes on the details and intricacies involved, but for this discussion our intent is to keep it high-level.
Insurance: A two-party contract whereby one party (insurer) promises to protect the other party (the insured) against loss or damage. The insured (school) is made whole or defended by the insurer.
Surety Bond: A three-party agreement which legally binds a principal (treasurer) who needs the bond, an obligee (school/state) who requires the bond, and a surety who financially guarantees the treasurer's tasks will be performed.
Surety bonds provide protection for the obligee (school), not the principal (treasurer). The treasurer is not protected by the bond. The school, state, and public funds are protected.
Simply put, treasurer bonds guarantee the treasurer will act in accordance with the bond: the bond guarantees the treasurer's tasks.
With the Ohio School Plan (OSP) product, there is one added important addition: The OSP form adds back coverage for the treasurer. The form will indemnify the treasurer if he or she is personally liable for the theft or the faithful performance of employees who serve under him or her. This is an additional added coverage for the treasurer.
Example: The state issues an FFR solely against an accounts receivable clerk for theft. The employee theft coverage picks up the thefts by employees not bonded (up to available limits).
Example: The state issues an FFR against an accounts receivable clerk and treasurer for the credit card theft by the clerk. Employee theft coverage picks up the theft by the clerk and indemnifies the treasurer for FFR against the treasurer up to available limits.
Ultimately the treasurer is responsible for the loss of money either directly or by reimbursing the surety.
The OSP theft coverage indemnifies the treasurer if he or she is found personally liable for a theft or in the case of lack of faithful performance by employees who serve under him or her, up to available limits.Effective January 1, the Ohio School Plan is pleased to announce that we are able to offer crime limits up to $5,000,000. You do not need to wait until your policy renewal date to change your coverage limit. Please contact your Ohio School Plan representative with any questions or to make changes to your current crime coverage limit.
It is important to have mechanisms in place to protect schools and the public from theft of public funds. At the same time, it is critical that district leadership–including the treasurer–understand the difference among the coverages designed to protect the district, the public and the individual, and how each is used. Understanding how these coverages respond is the basis for determining how best for each district to protect themselves and their employees.