If an employer hires an individual with a known history of embezzlement, do they have coverage under their blanket bond?

The correct answer is that coverage is not available if the employer has prior knowledge of dishonesty. Blanket bonds are designed to protect against losses due to the dishonest acts of employees. However, if an employer knowingly hires an individual with a history of embezzlement, they are aware of the potential risk associated with that individual. This pre-existing knowledge can negate coverage for losses arising from any dishonest acts committed by that individual.

Insurance policies, including surety bonds, often contain clauses that limit or exclude coverage in situations where the insured is aware of a risk prior to making a claim. This principle is rooted in the concept of insurable interest and the duty to disclose relevant information. By hiring someone with known dishonesty, the employer has essentially assumed that risk, which is why the blanket bond would not provide coverage in such cases.