§ 25-3-405. Employer's responsibility for fraudulent indorsement by employee.
§25‑3‑405. Employer's responsibility for fraudulent indorsement byemployee.
(a) In this section:
(1) "Employee"includes an independent contractor and employee of an independent contractorretained by the employer.
(2) "Fraudulentindorsement" means (i) in the case of an instrument payable to theemployer, a forged indorsement purporting to be that of the employer, or (ii)in the case of an instrument with respect to which the employer is the issuer,a forged indorsement purporting to be that of the person identified as payee.
(3) "Responsibility"with respect to instruments means authority (i) to sign or indorse instrumentson behalf of the employer, (ii) to process instruments received by the employerfor bookkeeping purposes, for deposit to an account, or for other disposition,(iii) to prepare or process instruments for issue in the name of the employer,(iv) to supply information determining the names or addresses of payees ofinstruments to be issued in the name of the employer, (v) to control the dispositionof instruments to be issued in the name of the employer, or (vi) to actotherwise with respect to instruments in a responsible capacity."Responsibility" does not include authority that merely allows anemployee to have access to instruments or blank or incomplete instrument formsthat are being stored or transported or are part of incoming or outgoing mail,or similar access.
(b) For the purpose ofdetermining the rights and liabilities of a person who, in good faith, pays aninstrument or takes it for value or for collection, if an employer entrusted anemployee with responsibility with respect to the instrument and the employee ora person acting in concert with the employee makes a fraudulent indorsement ofthe instrument, the indorsement is effective as the indorsement of the personto whom the instrument is payable if it is made in the name of that person. Ifthe person paying the instrument or taking it for value or for collection failsto exercise ordinary care in paying or taking the instrument and that failuresubstantially contributes to loss resulting from the fraud, the person bearingthe loss may recover from the person failing to exercise ordinary care to theextent the failure to exercise ordinary care contributed to the loss.
(c) Under subsection(b) of this section, an indorsement is made in the name of the person to whoman instrument is payable if (i) it is made in a name substantially similar tothe name of that person or (ii) the instrument, whether or not indorsed, isdeposited in a depositary bank to an account in a name substantially similar tothe name of that person. (1899, c. 733, s. 9; Rev., s. 2159; C.S., s. 2990;1949, c. 953; 1965, c. 700, s. 1; 1995, c. 232, s. 1.)