§ 6A-3-405 - Employer's responsibility for fraudulent indorsement by employee.
SECTION 6A-3-405
§ 6A-3-405 Employer's responsibility forfraudulent indorsement by employee. – (a) In this section:
(1) "Employee" includes an independent contractor andemployee of an independent contractor retained by the employer.
(2) "Fraudulent indorsement" means (i) in the case of aninstrument payable to the employer, a forged indorsement purporting to be thatof the employer, or (ii) in the case of an instrument with respect to which theemployer is the issuer, a forged indorsement purporting to be that of theperson identified as payee.
(3) "Responsibility" with respect to instruments meansauthority (i) to sign or indorse instruments on behalf of the employer, (ii) toprocess instruments received by the employer for bookkeeping purposes, fordeposit to an account, or for other disposition, (iii) to prepare or processinstruments for issue in the name of the employer, (iv) to supply informationdetermining the names or addresses of payees of instruments to be issued in thename of the employer, (v) to control the disposition of instruments to beissued in the name of the employer, or (vi) to act otherwise with respect toinstruments in a responsible capacity. "Responsibility" does not includeauthority that merely allows an employee to have access to instruments or blankor incomplete instrument forms that are being stored or transported or are partof incoming or outgoing mail, or similar access.
(b) For the purpose of determining the rights and liabilitiesof a person who, in good faith, pays an instrument or takes it for value or forcollection, if an employer entrusted an employee with responsibility withrespect to the instrument and the employee or a person acting in concert withthe employee makes a fraudulent indorsement of the instrument, the indorsementis effective as the indorsement of the person to whom the instrument is payableif it is made in the name of that person. If the person paying the instrumentor taking it for value or for collection fails to exercise ordinary care inpaying or taking the instrument and that failure substantially contributes toloss resulting from the fraud, the person bearing the loss may recover from theperson failing to exercise ordinary care to the extent the failure to exerciseordinary care contributed to the loss.
(c) Under subsection (b), an indorsement is made in the nameof the person to whom an instrument is payable if (i) it is made in a namesubstantially similar to the name of that person or (ii) the instrument,whether or not indorsed, is deposited in a depositary bank to an account in aname substantially similar to the name of that person.