This article originally appeared Anderson Kill's Policyholder Advisor (July/August 2009).

Just as a rising tide lifts all boats, receding prosperity reveals unsuspected threats. From corporate counsel’s perspective, the risk is not just the phantoms of the deep — massive monsters like Madoff and the subprime meltdown — but also shallow scum like embezzling employees, computer hackers, forgers and other ordinary cheats.

The risk of loss from crimes like these should be addressed in every corporate insurance program through commercial crime or “fidelity” coverage. If a loss emerges, corporate counsel and risk managers should immediately focus on maximizing insurance recovery. This is easier said than done, since the discovery of betrayal by a trusted employee or business contact typically leads to disbelief, shock, anger and shame. Paralysis is understandable, but it only brings additional risk. Prompt analysis and action is necessary.