When an employee takes fuel, sealer, stone or hot mix from your paving company, your property policy will not pay for it, because its standard special causes-of-loss form excludes theft by your own people. The coverage written for that loss is the Employee Theft agreement in a commercial crime policy, and its trigger decides which policy year answers.
Why the property policy excludes theft by your own people
The property policy leaves out employee theft on purpose, and says so in plain terms. Under the standard ISO Causes Of Loss – Special Form as commonly written (CP 10 30 10 12, the edition we read), exclusion 2.h in section B removes loss caused by a “Dishonest or criminal act (including theft) by you, any of your partners, members, officers, managers, employees (including temporary employees and leased workers), directors, trustees or authorized representatives, whether acting alone or in collusion with each other or with any other party”.
The exclusion also removes “theft by any person to whom you entrust the property for any purpose, whether acting alone or in collusion with any other party.” Its one carve-back draws a sharp line: it “Does not apply to acts of destruction by your employees (including temporary employees and leased workers) or authorized representatives; but theft by your employees (including temporary employees and leased workers) or authorized representatives is not covered.” A laborer who wrecks the shop leaves you a property question. A laborer who loads your sealer into his own trailer does not.
North Carolina’s employee dishonesty and computer fraud guidance, written for the State’s own crime program, puts it in one line: “employee dishonesty losses are excluded from coverage under virtually all commercial property policies”. A stranger cutting the fence overnight is a different loss that belongs to your property coverage.
Fuel, sealer, stone and parts under the Employee Theft agreement
The Employee Theft agreement is written for exactly this loss. Under the standard ISO Commercial Crime Coverage Form (Loss Sustained Form) as commonly written (CR 00 21 11 15, the edition we read), and in the same words in the Commercial Crime Coverage Form (Discovery Form) (CR 00 20 11 15, the edition we read), the Employee Theft insuring agreement says: “We will pay for loss of or damage to “money”, “securities” and “other property” resulting directly from “theft” committed by an “employee”, whether identified or not, acting alone or in collusion with other persons.”
Two definitions carry the weight for a paving yard. “‘Theft’ means the unlawful taking of property to the deprivation of the Insured.” And “‘Other property’ means any tangible property other than ‘money’ and ‘securities’ that has intrinsic value.” Diesel, drums of sealer, stockpiled stone, diverted hot mix and paver parts are all tangible property of that kind. The form names none of them, and whether a particular loss is paid still turns on your declarations, the valuation terms and the proof. Each insuring agreement applies only where the declarations show a limit for it, so a crime policy without Employee Theft scheduled does nothing here.
Small diversions are counted together: an occurrence includes “The combined total of all separate acts whether or not related”, so a season of fuel taken a little at a time by one employee is a single occurrence under a single limit and deductible.
The crime form’s exclusion for motor vehicles and attached equipment is written for the premises and outside-the-premises agreements, not for Employee Theft. No standard wording we read addresses fuel cards, so a card diversion depends on your declarations, the definitions and the card program’s terms. A roller taken overnight by a stranger is a contractors equipment question instead.
Who the form treats as an employee, and who it leaves out
The crime form’s definition of employee reaches most of a paving crew, but not everyone who touches your material. It covers people on your payroll whom you direct and control, leased workers furnished under a written labor-leasing agreement, and temporary workers furnished to substitute for a permanent employee or “To meet seasonal or short-term work load conditions”. That phrase fits the spring hiring on parking lot striping crews. How agency and leased crews are placed on your program is covered in temporary and leased workers on a paving crew.
The definition then excludes “Any agent, broker, factor, commission merchant, consignee, independent contractor or representative of the same general character”. A sub-hauler who keeps part of a load of stone is usually outside the agreement, and the property policy’s entrusted-property wording removes the same loss there; hauling agreements and signed tickets manage that exposure. Owners are outside too: the crime form excludes “Acts Committed By You, Your Partners Or Your Members”.
Proving a bulk-material loss without leaning on the count
Sealer, stone and hot mix disappear by quantity rather than by item, and that is where most employee theft claims on a paving yard get hard. The crime form’s Inventory Shortages exclusion, which applies to Employee Theft, removes “Loss, or that part of any loss, the proof of which as to its existence or amount is dependent upon:” an inventory computation or a profit and loss computation.
The exclusion then opens a door: “However, where you establish wholly apart from such computations that you have sustained a loss, then you may offer your inventory records and actual physical count of inventory in support of the amount of loss claimed.” Something other than the count must show the theft first: a witness, a tank log that disagrees with fuel receipts, camera footage, an admission. Then the count measures it. The property form’s limitation 1.e in section C does the same for “Property that is missing, where the only evidence of the loss or damage is a shortage disclosed on taking inventory”. Neither form pays for a shortfall only the count can show.
The crime form also expects records before the loss: “You must keep records of all property covered under this insurance so we can verify the amount of any loss.” Its indirect loss exclusion removes the “costs, fees or other expenses you incur in establishing either the existence or the amount of loss under this insurance.” The reconstruction is your cost.
The U.S. Trustee Program’s internal control guidance for the small business owner says “Related duties should be assigned to different people whenever possible.” In a sealcoating operation, that can mean one person signs for sealer deliveries and another reconciles the drum count against jobs.
Loss sustained or discovery: which policy year answers
The two crime forms differ mainly in their trigger, and the choice matters because diversion on a paving crew can run for seasons before anyone notices. Oregon’s state risk office, explaining how it sets crime limits in its own contracts, notes that “dishonest employee(s) would have multiple opportunities to steal before the loss would be discovered”.
The loss sustained form applies to loss “resulting directly from an “occurrence” taking place during the Policy Period shown in the Declarations”, found during that period or the extended period after it. The theft has to happen while the policy is in force; earlier years reach it only through prior-insurance conditions that ask whether the earlier coverage was continuous and would have covered the loss.
The discovery form applies to loss from an occurrence “taking place at any time which is “discovered” by you during the Policy Period shown in the Declarations”. It asks when you found the loss, not when the stealing began.
Switching needs care. The loss sustained form’s extended period to discover loss closes as soon as replacement coverage takes effect. The discovery form answers that overlap with a condition titled “Policy Bridge – Discovery Replacing Loss Sustained”, which then pays only above what the prior policy pays. Neither form is simply better; the Employee Theft agreement, exclusions and definitions are the same text in both.
Real-World Scenario: A sealcoating contractor moves its crime coverage from a loss sustained form to a discovery form at renewal. Midway through the next season, a driveway customer calls about a warranty on a job the company has no record of, and the owner learns a yard hand has been selling company sealer on weekends since before the switch. The call is the independent evidence the inventory exclusion requires; drum counts and delivery tickets then support the amount. Which policy answers the earlier months turns on the bridge condition and on whether the old policy’s discovery window was still open.
Discovering the loss, and what the policy asks of you next
Discovery is an awareness test, not a certainty test, and your duties start with it. The crime form reads: “‘Discover’ or ‘discovered’ means the time when you first become aware of facts which would cause a reasonable person to assume that a loss of a type covered by this insurance has been or will be incurred, regardless of when the act or acts causing or contributing to such loss occurred, even though the exact amount or details of loss may not then be known.”
From that moment the duties condition applies. The first is “Notify us as soon as possible.” Then come a sworn proof of loss within the period the form states, cooperation, “Produce for our examination all pertinent records”, and “Secure all of your rights of recovery against any person or organization responsible for the loss and do nothing to impair those rights.” The form’s police-notice duty does not extend to employee theft, so involving the police is your call.
Confronting, firing, prosecuting or suing an employee is a decision for you and your attorney under your state’s law, your contracts and your policy wording; this post is not legal advice. A dismissal that follows a theft can bring its own claim, the kind employment practices liability is written for.
Once you know, that employee is no longer covered
The crime form ends Employee Theft coverage for a specific person the moment you learn of that person’s dishonesty. The condition reads: “This Insuring Agreement terminates as to any “employee”:” as soon as you, or a partner, member, manager, officer, director or trustee who is not in collusion, “learn of “theft” or any other dishonest act committed by the “employee” whether before or after becoming employed by you”. The insurer can also end it for an employee by written notice.
In practice, a person you know has stolen, whether from you or from a former employer, and who keeps the fuel card, the yard key or the job to receive deliveries, is uninsured under this agreement for anything taken afterward. The form does not tell you whether to keep that person; it tells you what it will no longer pay for.
The same idea applies at renewal. An exclusion removes loss caused by an employee when you, or a manager or officer not in collusion, “learned of such “theft” or dishonest act prior to the Policy Period shown in the Declarations”.
Whose property, and where fidelity bonds fit
The crime policy protects your property and property you hold, not someone else’s claim against you. Its ownership condition reaches property you own, lease or hold, then adds: “However, this insurance is for your benefit only. It provides no rights or benefits to any other person or organization.” An owner that wants its own property protected from your employees is asking for third-party coverage added by endorsement; Oregon’s risk office requires it in certain state contracts, which shows what a public owner can ask for, not a rule for paving work.
The Florida Department of Financial Services’ bonds overview notes that “A fidelity bond protects employers from employee theft” and that “There are two general categories of bonds - fidelity and surety.” The bonds you post on public work are surety, covered in bid, performance and payment bonds for paving. A company retirement plan needs its own bond: the U.S. Department of Labor’s ERISA fidelity bond publication describes one that “protects the plan against losses caused by acts of fraud or dishonesty”. That bond is about the plan, not your crime policy.
When an employee wires money because an impersonator asked, North Carolina’s guidance notes that “The employee who makes the transfer is acting in good faith, so it is not employee dishonesty.” That loss belongs to the crime form’s “Computer And Funds Transfer Fraud” agreement, explained in payment fraud and cyber coverage for paving contractors. Employee theft sits beside property, auto and equipment in your paving contractor insurance program.
Send us your property forms schedule, any crime declarations you carry and a short note on how fuel and material are received and issued in your yard, and request a quote for employee theft coverage sized to how your crews actually work.