An indemnity is not the end of a fraud file, it is its middle. The diverted money still exists somewhere, in whole or in part, and its recovery follows rules that decide who receives what. This lesson closes the course because it bears on the only thing the parties look at once liability is established: how what comes back is shared.
The central mechanism is subrogation, and it should be stated simply. The insurer that indemnifies steps into the insured's rights against the perpetrator and against liable third parties, up to what it has paid. It is not a favor granted to it, it is the counterpart of payment, and it explains most of the obligations the contract imposes on the insured after the loss: do not settle without consent, do not waive a recourse, preserve the evidence, cooperate with proceedings.
One must then know in what order recoveries are shared, since intuition is wrong and the stakes are real. Most contracts provide that the insured is served first for what remained with it, that is, the deductible and the part of the loss above the limit, before the insurer reimburses itself. Others provide a proportional split. On a file where the loss exceeds the limit, the difference between those two clauses bears on substantial sums, and it is read before the loss since it can no longer be negotiated after.
There are four sources of recovery and they are not equal. The perpetrator's assets, often the most disappointing, because diverted money went into a way of life and not into savings. Third parties who took part, who in a collusion are the most solvent. Banks, where a failure of their own vigilance obligations can be established. And the rapid freezing of funds, which is not a recourse but which recovers more than the other three combined when it happens within hours.
That last point deserves isolating because it inverts the hierarchy of effort. A fraudulent transfer passes through intermediary accounts, and there is a short window, often a few dozen hours, during which a recall request can succeed. Past that, the funds have been dispersed and the recovery rate collapses. A company discovering a fraudulent transfer must therefore call its bank before calling its broker, and it is the only case in this whole course where insurance is not the first step.
A governance question must be added that arises in every file and that nobody enjoys handling: pursuing the perpetrator. A company hesitates, fearing noise, out of regard for someone long loyal, or because proceedings will cost more than they return. Those reasons are admissible, but the decision no longer belongs entirely to the insured once the indemnity is paid, since the insurer is subrogated. The moment to discuss it is before settlement, frankly, and not by a unilateral waiver the insurer will discover.
The course therefore closes on what it opened. A crime policy is not liability insurance: it reimburses a loss the insured suffers in its own house, and that is why what comes back afterwards does not belong entirely to it. The four post-loss obligations, do not settle, do not waive, preserve, cooperate, all flow from that single characterization, and an insured that has understood it does not experience them as fussy constraints but as the price of what it received.
A transport company suffers a 1.4 million euro misappropriation by its administrative director over six years. The policy carries a 1 million limit and a 50,000 euro deductible; the insurer pays 950,000 euros, the company bearing 50,000 of deductible and 400,000 above the limit. Three recoveries follow. The sale of the director's property yields 220,000 euros net. An action against the bank, for having executed transfers over four years to an account in the name of a company the director managed, settles at 180,000 euros. Finally the director voluntarily repays 60,000 euros. The allocation clause provides that "the insured is reimbursed by priority for the part of the loss remaining with it". Who receives the 460,000 euros recovered?
What remained with the company must be established first, since the clause refers to it: 50,000 euros of deductible plus 400,000 above the limit, that is 450,000 euros. The clause providing for priority reimbursement, the company is served first up to those 450,000 euros out of the 460,000 recovered, and the insurer receives only the balance, 10,000 euros against the 950,000 it paid. The result surprises and is nonetheless exactly what the clause arranges: it places the recovery risk on the insurer and not on the insured, which is coherent with the fact that the insured has already borne the uninsured part of the loss. A proportional allocation clause would have given an entirely different result, the insurer receiving around 68 percent of recoveries in proportion to what it paid, close to 315,000 euros, and the company 145,000 against the 450,000 it had lost. The difference between the two wordings is here more than 300,000 euros for the company, on a clause nobody reads before the loss and which can no longer be negotiated after. Two observations complete the file. The first is that the most productive source is not the expected one: the director's assets yield 220,000 euros and his voluntary repayment 60,000, while the action against the bank yields 180,000, and that proportion is ordinary, a fraudster having rarely saved what it diverted. The second is that the action against the bank would not have existed had the company settled alone or waived pursuit: it is precisely the right the insurer is subrogated to, and it was worth 180,000 euros. What to take to another file fits in one sentence: the order of allocation is read at placement, and it is often worth more than the last point of negotiation on the premium.
- 01An indemnity is the middle of the file, not its end: the money still exists somewhere and its allocation is decided by a clause.
- 02Subrogation is not a favor to the insurer, it is the counterpart of payment, and it explains the four post-loss obligations.
- 03Priority reimbursement or proportional allocation: on a loss exceeding the limit, the gap runs to hundreds of thousands of euros.
- 04Four sources, and the most productive is not the perpetrator's assets: a fraudster has rarely saved what it diverted.
- 05Faced with a fraudulent transfer, call the bank before the broker: it is the only case in this course where insurance is not the first step.