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Multiple Insured Parties Under Fidelity Bond

March 21, 2014

Robert K. Rusch
 

RE: Multiple Insured Parties Under Fidelity Bond

You have asked whether a federally insured credit union may include one or more credit union service organizations (CUSOs) as additional insureds under its fidelity bond.  Also, if the answer is yes, you have asked whether there are any limitations or other requirements that apply when adding such additional insureds.  The answer to your first question is no, a federally insured credit union may not include one or more CUSOs or other parties as additional insureds under its fidelity bond.  Therefore, it is not necessary to answer your second question.

NCUA rules require all federally insured credit unions to obtain fidelity bond coverage under an individual policy.  12 C.F.R. §§ 713.3(a), 741.201(a).  Further, in Legal Opinion Letter 04-0744 (enclosed), NCUA opined that a CUSO that provides management services for multiple credit unions could not purchase a single fidelity bond with each credit union named as an insured.  While the earlier situation is different from the question that you ask, the same reasoning and requirement apply.

The requirement for a federally insured credit union to obtain an individual fidelity bond policy has not changed since NCUA issued Legal Opinion Letter 04-0744, and we conclude that adding one or more CUSOs to a federally insured credit union’s fidelity bond would violate the rule.  As the earlier Legal Opinion Letter explained, a purpose of the individual policy requirement is to avoid diluting or conflicting with the individual credit union’s coverage.  In addition, this requirement prevents a claim against one insured from depleting coverage limits for the credit union.


​​Sincerely,

/S/
 
Michael J. McKenna
General Counsel