As I have frequently written, including in my last post, we all make mistakes, and sometimes those mistakes hurt other people. That is why liability insurance is a great thing. But in general my various rants address third-party claims; that is, person A made a mistake and person B was injured as a result. Person A's liability insurance will provide money to pay for the loss person B suffered.
First-party insurance is insurance that pays the policyholder. For example, homeowner's insurance includes property damage coverage. If your house burns down, the insurance you pay for will reimburse you for the financial damage you suffered.
There is generally no coverage under homeowner's insurance if your house burned down because you committed arson. There is more likely going to be coverage if you accidentally caused a fire that burned your house down. But what if you accidentally burned your house down because of an act of incredible stupidity? I'm not talking smoking in bed. I'm talking not noticing that your kids are building a campfire in the middle of your living room.
In FundQuest Inc. v. Travelers Cas. & Sur. Co., 2010 WL 2223301 (D. Mass.), the court addressed an analogous situation in an employee dishonesty policy.
FundQuest, a financial advisory firm (you'll see how ironic this is in a moment) had an employee named John Curran who had a low level IT support position. Curran submitted a request to transfer direct deposit of his paycheck to a new bank.
A human resources employee accidentally inserted the payroll information of FundQuest's founder, president, and CEO, Robert Del Col. As a result, the company began depositing Del Col's paychecks in Curran's account. The court described the paycheck as "appreciably larger" than Curran's. The human resources department had made a stupid mistake, somewhat akin to falling asleep while smoking in bed.
Curran did not notify FundQuest of the mistake. Instead--and you have to give him credit for chutzpah--he complained of not receiving his own paycheck.
FundQuest did not respond by looking into the paperwork and noticing that Curran was receiving his CEO's paycheck. Instead, it merely began adding Curran's own paycheck to his direct deposit account. Another stupid mistake, somewhat akin to noticing that a pan on the stove is on fire and assuming that the fire will burn itself out.
Curran received both paychecks for two months, when he quit working for FundQuest. I would love to know why he quit and if he guessed what would happen next: although his own paycheck stopped when he left the employment of FundQuest, he continued to receive Del Col's paycheck.
More than a year later, Del Col noticed that he had not been paid for sixteen months. Why did he notice at that point? I can only guess that it was because it was January, 2009, which was right around the time we all realized that the tanking of the economy was not going to be a mere blip. Suddenly, every $258,964.27--the amount of salary he was not paid-- must have begun to matter to Del Col. In other words, he must have suddenly started to care that his kids were burning down his living room, because he might actually have to live in it.
Not surprisingly, since Del Col was president and CEO and all, FundQuest promptly reimbursed Del Col the amount he was owed in back salary.
I know you're all wondering: Did Fundquest get reimbursed by its insurer? Find out here on Tuesday, July 20, at 1:30 PM, when my next post will be published.