The Mistake.
A temporary staffing firm assigned two temporary bookkeepers to a company for one year to cover two maternity leaves. During this period, the bookkeepers failed to pay the mortgages on the company’s properties, as well as the property taxes, resulting in a loss to the company.
The company sued the staffing firm for the amount of the loss. An investigation revealed that both employees had work histories of poor performance and that one had once been fired for incompetence.
The company succeeded in showing that had the temporary staffing firm conducted thorough background checks on its temporary employees it would have discovered the poor work histories.
The Consequences
Demand amount: Full policy limit of $1mm in order to try and recoup company loss.
Defense Costs Incurred: $50K
Indemnity Costs: Settled for $150K
The Avoidance
Proper screening and background checks for all placed employees would help prevent or limit similar situations.