Forgery Claim: Do we pay?

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Question:

We have a forged endorsement claim that was submitted with a forgery questionnaire and affidavit. The claim is timely and properly presented and the amount is not large. Ordinarily I would not hesitate to pay, however the details on the questionnaire make me feel that we should not be held entirely liable. Specifically, the claimant suspects her sister of stealing the check, and admits that the check was not properly secured. Can I decline this claim or suggest shared liability based on the evidence of negligence by the claimant or are we as the depositing bank required to pay forged endorsement claims regardless of the details surrounding the forgery?

Answer:

Answer by John Burnett:

I believe that you are free to attempt a negotiated settlement of this claim, regardless of the circumstances, if your bank and the claimant are the only parties involved. However, if there are other parties who have also endorsed the check between your bank and the claimant, getting everyone on board might be a challenge. Each of those endorsers is "on the hook" for possible liability on the forgery.

Answer:

Answer by Barbara Hurst:

The key to your question, to me, is the fact that this is not a large amount. Keep in mind it may cost you more in time and labor to fight it than to pay it. Of course, before you entertain the claim at all, ask to see a copy of the police report that names the sister as a suspect, and get assurance that your customer will assist you in prosecution. Without those two pieces of documentation, you can't even CONSIDER the claim, can you?

First published on BankersOnline.com 07/14/03