Arizona Adjuster Practice Exam

How does the crime policy respond when Norbert Brothers Accounting submits a claim for embezzlement by one of its owners?

1. It fully covers the embezzlement loss

2. It denies the claim based on exclusion for dishonest acts of the named insured

3. It processes the claim with a reduced payout

4. It investigates further before making a decision

The correct answer is: It denies the claim based on exclusion for dishonest acts of the named insured

In the context of a crime policy, many policies include specific exclusions related to dishonest acts or conduct by the named insured or certain types of employees. When Norbert Brothers Accounting submits a claim for embezzlement committed by one of its owners, the policy is likely to deny the claim based on this exclusion. This is because the owner's actions, being part of the named insured entity, fall under the exclusionary provisions of the policy. Crime policies are designed to protect businesses from losses due to employee dishonesty, but they often do not extend coverage when the dishonest act is attributable to someone who holds an ownership interest in the company. Such provisions are important to limit the insurer's liability and manage risk, as allowing coverage for owner-related embezzlement could lead to moral hazard, where owners engage in dishonest actions believing they are protected. Thus, the response to this situation aligns with the typical functioning of crime policies, leading to the denial of the claim based on the exclusion for dishonest acts committed by the named insured or anyone associated with the ownership of the business.