Expanding the Definition of “Employee”

Expanding the Definition of “Employee”

Agnes Gawecki


The definition of “employee” under Employee Theft Coverage is crucial in determining whether benefits will be paid in the event of property theft.  Employee Theft addresses various types of employees, though its noteworthy to point out owners and partners are excluded from the coverage. Employee Theft insurance relies on a specific definition of “employee” that has expanded tremendously since 2013.

According to the Insurance Services Office (ISO) Form CR 04 08 08 13 “Employee” is defined as:

  1. Any person named in the Schedule, if coverage applies on a Name Schedule basis; or
  2. Any person you engage to perform the duties of a position shown in the Schedule, if

     coverage applies on a Position Schedule basis.

This limited definition is not specific enough to apply to all companies. In this day and age, companies rely on independent contractors, substitute workers, seasonal workers, short-term workers, leased employees, volunteers, and interns. The insured needs a solid understanding of the different types of employees and the implications.

The expanded definition of “employee” used in ISO CR 00 23 11 15 includes a more comprehensive description of the types of employees. One notable change added to this definition is the referral to an “employee” as “any natural person”. A “natural person” is a human, not a corporation.

Many companies will have the following type of “employee”:

(1)  Any natural person:

      (a)  While in your service and for the first 30 days immediately after termination of service,

      unless such termination is due to “theft” or any other dishonest act committed by the 


     (b)  Whom you compensate directly by salary, wages or commissions; and

     (c)  Whom you have the right to direct and control while performing services for you;

All of the above conditions must be met in order for an individual to be defined as an “employee” of an organization. In many cases, the executive or shareholder will not be considered an “employee” due to the “right to direct and control” condition stated in the definition.

Some companies will use other means of obtaining workers, as indicated below in the policy:

(2)  Any natural person who is furnished temporarily to you:

       (a)  To substitute for a permanent “employee”, as defined in Paragraph 7.a.(1), who is on

       leave; or

      (b)  To meet seasonal or short-term workload conditions;

  while that person is subject to your direction and control and performing services for


       (c)  Any natural person who is leased to you under a written agreement between you and a

       labor leasing firm, to perform duties related to the conduct of your business, but does

       not mean a temporary “employee” as defined in Paragraph 7.a.(2);

Temporary personnel provided by employment agencies are included as employees while performing services and are subject to the insured’s direction and control. However, the temporary personnel are excluded while having care and custody of property outside of the insured premises.

Let’s not forget about trustees, managers, and officers. These employees are responsible for handling the financials of the company and are included in the definition of an “employee” while performing duties usual to an employee. Also, workers who are guest students or interns are also defined as an “employee” under the policy.

ISO defines “employee” in a broad sense. Organizations today may use the services of a non-employee in a manner similar to an employee. Therefore, it is critical to understand the differences–carefully reviewing the definition of “employee” in the policy so there are no surprises when dealing with a theft claim.

We should note that agents, brokers, consignees, and independent contractors are specifically excluded from the coverage. However, there are standard endorsements to broaden the definition of “employee” to include agents and their employees, volunteer workers, and the spouse and children of building managers.

In conclusion, the modern definition of “employee” can include a comprehensive list of who may fall under that category. As organizations evolve, they hire other workers not included in the definition; hence, endorsements are added. The definition is constantly expanding and as insurance adjusters, we need to understand the definition of “employee” as defined in the policy.


Should you have any questions about this article or would like more information about this topic, please contact Ms. Gawecki at e-mail agawecki@sdccpa.com or call her at (630.820.5770).  Her firm specializes in the investigation and handling of complex fidelity losses.