If you are a Condominium Corporation (CC) Board member or CC unit owner you may find yourself asking: What is Fidelity Insurance and why should my Condominium Corporation consider Fidelity Insurance?

Fidelity bonding insurance, often referred to as employee dishonesty insurance, is a kind of insurance that protects businesses from fraudulent acts committed by people that may have a trust relationship or employee-employer relationship. If that relationship is breached by a criminal act, such as fraud, criminal mischief, or data theft, that results in financial damage or loss, this insurance is intended to protect the policyholder.

Trust is paramount in all business dealings and managing a CC is no different. As a CC volunteer board of directors, you often don't have the time or resources available to search out references to determine the trustworthiness of everyone your CC must rely upon. As a former police officer, I've met with many business owners that realized too late they have been the victim of a crime that at its core, is a breach of trust committed by an employee or someone in a trust relationship.

While a police service might be able to charge someone with a criminal act and a conviction might be gained, restitution is far from certain. Police investigations and court proceedings could take years, with no certainty of restitution. Even if ordered, would you be able to collect from the responsible party if they have no assets or ability to pay a court order? If the loss is significant, harm to the business and those dependent upon the business may occur very shortly after the discovery of the loss. A recent case in point from the Manitoba Court of Kings Bench illustrates the potential for loss perfectly. While the exact circumstances of the loss are not one a CC would ever experience, the core fact remains, the loss occurred because of a breach of trust.

In this article, I relied upon the expert advice of one of our CCI Manitoba Board Members, Seth Henoch. Seth is the Vice-President, Client Executive, Real Estate Division of BFL Canada. Seth sets out a very good analysis of the benefits of fidelity insurance. If you're a CC with business relationships, for example, a property management company, maintenance contractors or anyone on the board that has financial authority, fidelity insurance might be worth serious consideration.

A property management firm can carry a fidelity bond, however, this is intended to protect the property management firm as the employer from a dishonest/fraudulent act from one of their employees. The basic premise of a fidelity bond is to protect the employer from the employee. Coverage is purchased by the employer to protect themselves.

In the case of a condominium corporation, the relationship is somewhat similar. The best way to view it is that the condominium corporation is the entity that wants its own money protected. Theproperty manager is not an employee per se, but they have been hired to manage the affairs of the corporation. Somewhat of an employee by contract. Using the same principles of the employer purchasing their fidelity bond to protect themselves from theft by their employee would apply here. The corporation purchasing itsfidelity bond coverage is the best way to approach it.