Chubb must payout an additional $225,420 after losing a claim dispute over the misappropriation of large sums over six years by a senior payroll officer.

From late 2012 until her death in April 2018, the employee used her position to steal $626,208 from a business insured by Chubb through wage transactions. The firm lodged a claim after discovering the loss in February 2019 via its broker.

However, Chubb limited its liability under the management liability policy, which covered employee theft, to $390,788 - those unauthorised payments that had the required dual authorisation.

It disputed liability for $225,420 across 71 fraudulent transactions that Chubb said only had sole authorisation. Those transactions fell under a policy exclusion for inadequate financial control protocols, Chubb argued.

In those instances, the payroll officer uploaded payment files into the firm’s online banking facility and the CEO approved the payments as a sole authoriser.

The Australian Financial Complaints Authority (AFCA) ruled Chubb was liable for the full amount and was required to pay out the balance of the stolen money.

Though it acknowledged the disputed $225,420 loss represented a “shortfall in policy compliance,” AFCA said Chubb had not established sufficient prejudice from that authorisation protocol.

“While the business did not have adequate financial protocols, as required by the policy, the available information is insufficiently compelling to establish Chubb was prejudiced by this,” AFCA ruled.

“Chubb has not argued there was any significant difference between the transactions worth $400,788 and the transactions worth $225,420. There is nothing extraordinary differentiating the payments.”

The largest part of the loss, which Chubb agreed to cover, happened even where payments were authorised by two employees with the authority to do so, AFCA noted.

“The only change in circumstances appears to have been sole authorisation. Given the far more significant loss of $400,789 - more than double the disputed loss - occurred under dual authorisation, the panel cannot fairly say Chubb has shown the business’s act of failing to require dual authorisation prejudiced it,” AFCA said.

“The panel is not satisfied Chubb has shown the act could reasonably be regarded as being capable of causing or contributing to the loss. It may not refuse to pay the claim.”

See the full ruling here.