§ 26-1-3.1-405 — Employer's responsibility for fraudulent endorsement by employee

Indiana § 26-1-3.1-405

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 3.1: Negotiable Instruments

Text

(a) In this section:
(1) "Employee" includes an independent contractor and employee
of an independent contractor retained by the employer.
(2) "Fraudulent endorsement" means:
(A) in the case of an instrument payable to the employer, a
forged endorsement purporting to be that of the employer; or
(B) in the case of an instrument with respect to which the
employer is the issuer, a forged endorsement purporting to be
that of the person identified as payee.
(3) "Responsibility" with respect to instruments means authority:
(A) to sign or endorse instruments on behalf of the employer;
(B) to process instruments received by the employer for
bookkeeping purposes, for deposit to an account, or for other
disposition;
(C) to prepare or process instruments for issue in the name of
the employer;
(D) to supply information determining the names or addresses
of payees of instruments to be issued in the name of the
employer;
(E) to control the disposition of instruments to be issued in the
name of the employer; or
(F) to act otherwise with respect to instruments in a responsible
capacity.
"Responsibility" does not include authority that merely allows an
employee to have access to instruments or blank or incomplete
instrument forms that are being stored or transported or are part
of incoming or outgoing mail or similar access.
(b) For the purpose of determining the rights and liabilities of a
person who, in good faith, pays an instrument or takes it for value or for
collection, if an employer entrusted an employee with responsibility
with respect to the instrument and the employee or a person acting in
concert with the employee makes a fraudulent endorsement of the
instrument, the endorsement is effective as the endorsement of the
person to whom the instrument is payable if it is made in the name of
that person. If the person paying the instrument or taking it for value or
for collection fails to exercise ordinary care in paying or taking the
instrument and that failure substantially contributes to loss resulting
from the fraud, the person bearing the loss may recover from the person
failing to exercise ordinary care to the extent the person bearing the
loss proves that the failure to exercise ordinary care substantially
contributed to the loss.
(c) Under subsection (b), an endorsement is made in the name of the
person to whom an instrument is payable if:
(1) it is made in a name substantially similar to the name of that
person; or
(2) the instrument, whether or not endorsed, is deposited in a
depositary bank to an account in a name substantially similar to
the name of that person.

Legislative History

As added by P.L.222-1993, SEC.5. Amended by P.L.129-1994, SEC.2; P.L.248-1995, SEC.2.