A New York appeals court referred a matter to trial on the issue whether a bank could seek coverage under a fidelity bond issued by an insurer for losses, after the bank’s employee mishandled a $20 million loan to a developer. The relevant issue is the employee’s intent.

There would have to be evidence that the employee intended to harm the employer or to benefit from the improper diversion of the money to the developer. Fidelity cover stems from dishonest acts intended to harm the employer and result in financial gain for the employee. The court found the bank would have to prove the employee had “manifest intent” to cause the loss and gain for herself.

In South Africa the same decision would be reached except that intent is proved on a balance of probabilities and not as something which has to be “manifest intent”.

The case is Key Bank NA v National Union Fire Insurance Co of Pittsburgh.