A California federal court ruled that an E&O insurance policy’s misappropriation-of-funds exclusion barred coverage for a company sued over a negligent background check that failed to reveal a candidate’s criminal history. The employee subsequently embezzled over $1 million from the client. The court found the exclusion unambiguous, held that the claim arose from the embezzlement, and rejected arguments invoking concurrent proximate cause. The insurer’s summary judgment was granted, including on breach of the implied covenant of good faith.
Hiring Tips Blog

Misappropriation of Funds Exclusion Bars Coverage for a Negligent Background Check that Led to Hiring of Embezzler
Dec 1, 2025 | Criminal History Check
Recent Posts
- Identity Verification is Now a Hiring Must-Have
- Utah Department of Public Safety (DPS) Approves Bayometric’s Live Scan Fingerprinting System
- Hair Testing More Reliable for Detecting Illegal Drug Use, HHS Panel Told
- Up in Smoke: Should Businesses Still Drug Test for Marijuana?
- Marijuana’s Restrictive Federal Classification Isn’t Supported by Science, New Study Concludes
Categories
- Artificial Intelligence Fraud (6)
- Background Check Compliance (109)
- Background Check Laws (68)
- Background Screening (57)
- Biometric Identification (10)
- Consumer Financial Protection Bureau (2)
- Credit Checks (33)
- Criminal History Check (194)
- Data Protection & Privacy (131)
- E-Verify Issues (84)
- Education Verification (9)
- Educational and Childcare Hiring (28)
- EEOC (52)
- Employer Negligence (37)
- Employment Screening (144)
- Fair Credit Reporting Act (111)
- Featured Posts (1)
- Financial Services Hiring (11)
- Healthcare Hiring (13)
- Hiring Legal Compliance (3)
- Home Services and Repairs Hiring (6)
- Human Resources & Benefits (26)
- Immigration Issues (99)
- IT and Data Security Hiring (12)
- Medical & Pharmaceutical Industry Hiring (15)
- Occupational Fraud (26)
- Pre-employment Drug Testing (201)
- Public Safety Hiring (1)
- Retail Hiring (14)
- Security Services Hiring (3)
- Social Media (32)
- Transportation Industry Hiring (23)
- Uncategorized (1)
- Wage History Checks (4)

