A customer manager at a bank branch defrauded elderly clients of millions, leading the bank to file a claim under its 'Employee Dishonesty Guarantee Insurance' policy. After a protracted legal battle, a court ruled in February that the insurance company must pay the bank over 3.28 million yuan in compensation.
In 2018, Lv Mouze, a customer manager at the Lanzhou Branch of CITIC BANK, deceived elderly clients, transferring funds intended for wealth management products into his personal accounts. The money was used to repay high-interest loans, for stock trading, and personal expenses. Within a few months, 14 clients were defrauded of a total of 3.93 million yuan.
Such cases have become increasingly common. The outcome was Lv Mouze's imprisonment, and the bank advanced over 3.86 million yuan to the victims from its own funds.
However, the bank had previously purchased an 'Employee Dishonesty Guarantee Insurance' policy. When it filed a claim with the insurer, it was flatly rejected.
After several years of legal disputes, the Gansu Provincial High Court, adopting the protest opinions of the procuratorial organ, reversed the earlier ruling in February. It ordered the insurance company to pay the bank over 3.28 million yuan in insurance compensation. By March 13, the full compensation had been paid.
A relevant bank official stated that this compensation not only covers the financial loss but also reinforces confidence in the rule of law and the spirit of contracts.
Recently, the Supreme People's Procuratorate website published an article titled "The 'Employee Dishonesty Insurance' Claim Settled After Seven Years of Struggle," disclosing the details of this case. While the article omitted the bank's name, related criminal judgment documents reveal it was the Dingxi Road Sub-branch of CITIC BANK's Lanzhou Branch, with the involved employee being customer manager Lv Mouze.
Furthermore, according to a 2021 civil ruling from the Shenyang Intermediate Court in Liaoning Province, CITIC BANK's head office had signed an insurance agreement with an insurer for the 2018-2020 period. The agreement covered the head office, all branches, and their sub-branches, with insurance types including property insurance, machinery loss, public liability, cash insurance, and employee dishonesty insurance. Lv Mouze's crime occurred during this insurance period.
**Employee Fraud Leads Bank to Claim** The incident traces back eight years. Starting in January 2018, Lv Mouze exploited the trust of elderly clients, their unfamiliarity with online banking, and poor eyesight. While assisting them with mobile banking, he obtained their passwords and transferred a total of over 3.93 million yuan intended for wealth management products into accounts he controlled.
In May 2019, an audit by the bank's Lanzhou Branch uncovered the fraud, leading to Lv Mouze. In June 2019, the bank fired him and reported the case to the police. Subsequently, victimized clients filed reports, initiating judicial proceedings. Lv Mouze was eventually convicted of fraud in a first-instance judgment.
During this time, to maintain its reputation, the bank used its own funds to advance over 3.86 million yuan to the 14 clients. Notably, just two months before the crime was discovered, the bank had purchased the 'Employee Dishonesty Guarantee Insurance' for its staff. The policy stipulated that the insurer would compensate for direct losses caused by an employee's dishonest acts.
A bank employee involved in the reimbursement recalled, "When we advanced the funds, we still held a glimmer of hope because the bank had just insured against employee dishonesty." However, when the bank filed a claim in October 2021, the insurer refused.
The insurer argued that Lv Mouze's actions did not directly cause property loss to the bank. The bank's payments to the clients were not a legal necessity resulting from Lv's actions, and there was no direct causal link. Therefore, it did not fall under the policy's definition of "dishonest acts" or the scope of coverage. The insurer also emphasized that the criminal case was not yet concluded, so the claim conditions were not met.
The bank was perplexed: having purchased insurance, with an employee committing fraud and the bank compensating clients, why was the insurer exempt?
**Claim Rejection Raises Questions About Insurance Purpose** In February 2022, the bank sued the insurer in the Lanzhou Railway Transport Court. The core dispute was whether Lv Mouze's actions constituted "dishonest acts" as defined by the insurance contract.
Although the contract explicitly listed fraud, embezzlement, and misappropriation as dishonest acts, the court ruled that as the criminal judgment against Lv was not yet final, his "dishonest acts" lacked confirmation by an effective legal document. Therefore, the claim conditions were not met, and the bank's lawsuit was dismissed. The bank's appeal was rejected, with the second-instance court stating that the bank's "voluntary reimbursement" to clients could not be equated with direct loss suffered due to Lv's actions. The bank's application for a retrial to the Gansu Provincial High Court was also rejected.
Wang Moupeng, head of the bank's risk management department, said, "The day the retrial was rejected, the office fell silent. No one could understand: we compensated the clients but couldn't get the insurance payout. What's the point of this insurance?"
**Prosecutor's Protest Leads to Reversal** In January 2025, the bank, with a final hope, applied for supervision to the Lanzhou Railway Transport Branch of the Gansu Provincial People's Procuratorate. Prosecutor Xu Ningbo, reviewing the case files, recognized it as a typical employee dishonesty insurance dispute involving key legal issues: Can facts from an undecided criminal case serve as a basis for a civil claim? Can a bank's compensation to clients be considered its own loss? How should "dishonest acts" be defined?
The case team concluded that the core of insurance is loss compensation and should not mechanically await a criminal verdict. In May 2025, the procuratorate issued a retrial recommendation to the court, which was not adopted, leading to an appeal to the Gansu Provincial People's Procuratorate.
Upon acceptance, a joint investigation team was formed. They obtained all criminal files, confirming that Lv Mouze was finally sentenced to 11 years in prison in March 2024 for fraud, with the facts of defrauding 3.93 million yuan from 14 clients established by the effective judgment. They verified the bank's payment records of over 3.86 million yuan to the victims, confirming the actual loss. They also studied the insurance policy terms and consulted experts.
The team argued that based on the effective criminal judgment, Lv's actions fully met the characteristics of "dishonest acts." The bank's compensation to clients with its own funds caused an actual loss of over 3.86 million yuan, with no evidence of the bank's intentional or gross negligence. The original ruling, citing the pending criminal case to deny the claim, was an error in law application.
Accordingly, the Gansu Provincial People's Procuratorate lodged a protest with the Gansu Provincial High Court.
On February 28, 2026, the high court heard the case. The procuratorial organ presented its protest, addressing the insurer's defenses with new evidence. Ultimately, the court adopted the protest opinions, reversed the judgment, and ordered the insurer to pay the bank over 3.28 million yuan in compensation. By March 13, the payment was completed.
**Prosecutor's Perspective: Upholding Contractual Spirit** China's Insurance Law does not explicitly define employee dishonesty insurance. Referring to definitions from the China Insurance Institute, it is a type of fidelity guarantee insurance that covers an employer's financial losses due to an employee's dishonest acts like theft, embezzlement, fraud, and misappropriation. When an employee exploits their position to harm the employer's interests, causing direct economic loss, the insurer is liable as per the contract.
This insurance is widely used in industries with high demands for employee integrity, such as financial institutions, serving as a crucial tool for risk dispersion and asset security.
The key disputes in this case were: 1. **Can "dishonest acts" be determined without a final criminal judgment?** The original court held that during the criminal retrial, Lv's actions were not finally determined, so claim conditions were unmet. However, the procuratorate found that by March 2024, Lv had been finally convicted of fraud. The effective criminal judgment was sufficient to confirm his actions as "dishonest acts" under the contract. Even without a final criminal case, the contract itself did not make an "effective criminal judgment" a prerequisite—it required only "basic facts verified by investigative authorities." The procuratorate argued that civil insurance liability should be based on contract terms and objective facts, not mechanically waiting for criminal proceedings to end. 2. **Is the bank's advance payment to clients a "direct loss" under the policy?** The insurer argued the bank's payment was a voluntary "reimbursement," not a direct property reduction caused by Lv. The procuratorate, after verifying fund flows, determined the bank made the payments after Lv's fraud was confirmed and under client pressure. This advance was a direct result of Lv's fraud, a reasonable emergency measure to mitigate client loss and protect the bank's reputation. The "loss" in insurance law is not solely defined by the term "reimbursement" in a criminal judgment but by whether the insured actually incurred property expenditure due to the insured risk. The bank's advance was a tangible loss. 3. **How should the open-ended "including but not limited to" clause be interpreted?** The policy schedule listed "fraud" under "dishonest acts" and used the open-ended phrase "including but not limited to." This indicated the parties' intent to broadly cover employee dishonesty, not limit it to listed crimes. When the criminally convicted fraud closely matched the listed behavior, the insurer should not use its informational advantage or interpretation rights of standard clauses to unduly narrow coverage. The procuratorate correctly applied the basic principle of contract interpretation: when a standard clause allows multiple interpretations, the interpretation favorable to the insured should be adopted.
The successful handling of this case involved not only accurate legal application but also a return to the contract's intent. Open-ended phrases like "including but not limited to" reflect the parties' intent to maximize risk coverage. Insurers should not exploit informational advantages to limit liability unduly, and insured parties should properly document losses and assert their rights promptly.
This reversal is expected to send a clear signal: the spirit of contracts must not be betrayed, and the principle of good faith must not be violated. Behind every insurance policy lies an expectation for the future and an entrustment of security.
**Background: CITIC BANK's Recurring 'Employee Dishonesty' Disputes** Employee dishonesty insurance is a property insurance covering an employer's direct economic losses from an employee's fraudulent, embezzling, or other dishonest acts during employment.
CITIC BANK has faced several such claim disputes in recent years.
Between 2016 and 2020, an employee at CITIC BANK's Dalian Branch, Li Mou, exploited his position to secretly activate clients' mobile or online banking, intercepted U-shields, stole passwords, canceled wealth management products without authorization, and processed loans, causing client net losses of 10.846 million yuan. The Dalian Intermediate Court later ordered the insurer's local branch to pay 8 million yuan in compensation.
From February 2014 to September 2021, over seven and a half years, an employee at CITIC BANK's Tangshan Xinhua Road Sub-branch, Han Mou, falsely claimed to purchase wealth management products for two major clients, transferring their funds to external accounts for off-book investments and high-risk profit-seeking activities. When the capital chain broke, 9.459 million yuan remained unrecovered, with only 88,000 yuan retrieved. In May 2025, the Shijiazhuang Intermediate Court issued a final judgment ordering the insurer's local branch to pay a total of 8.225 million yuan in compensation.
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