News reports have been published since at least 2013 that certain demands that Wells Fargo made (makes?) on its employees pretty much foreseeably result in fraud. Recent news reports advise that because Wells Fargo employees were subject to "cross-selling" requirements, among other requirements, at least 5,300 Wells Fargo employees at the present count opened millions of bogus accounts and credit cards in the names of Wells Fargo customers so that the employees could meet their sales quotas. See, e.g., Michael Corkery and Stacy Cowley, "DealBook / Wells Fargo Warned Workers Against Sham Accounts, But 'They Needed a Paycheck'" (New York Times Online, posted September 16, 2016); Andrew Ross Sorkin, "DealBook / Pervasive Sham Deals at Wells Fargo, and No One Noticed?" (New York Times Online, posted September 12, 2016).
Yesterday as this article is written, the current head of Wells Fargo confirmed the fraudulent opening of bogus accounts in testimony before the United States Senate.
He blamed the 5,300+ bad apples. He called them "rogue employees."
Are there any insurance policies including any bonds that provide coverage for 5,300+ bad apples and rogue employees? Wells Fargo is undoubtedly looking at this question right now. So are its insurance carriers.
Or if the damages to Wells Fargo employees are not really the results of misconduct by 5,300+ bad apples and rogue employees, but if instead they are proven to be the results of corporate requirements imposed on the apples by Wells Fargo, it seems that there may be good arguments that many if not all of the damages to Wells Fargo customers were foreseeable and even intentional. Wells Fargo admits that it has known about the fraud since at least 2013 and the "illegal sales" may have begun in 2009. Michael Corkery, "DealBook / Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says" (New York Times Online, posted Tuesday, September 20, 2016).
There is a recurring exclusion or "carve-out" from commercial general liability insurance "occurrence" coverage when the policyholder is shown to intentionally cause the damages complained of by the underlying plaintiff. This is a frequent insurance coverage issue. If that is shown to be the case here, then Wells Fargo faces some difficult issues of what it knew and when it knew it, as they say, if Wells Fargo is inclined to put on proof to contest whether the reported pattern of fraud was a covered "occurrence" or the exclusionary insurance coverage equivalent of intentional damages.
Time will tell. Stay tuned as coverage issues develop along with the liability issues embedded in this behavior.
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