47-3405. Employer's responsibility for
fraudulent indorsement by employee
A. In this section:
1. "Employee" includes an independent contractor and employee of an independent
contractor retained by the employer.
2. "Fraudulent indorsement" means:
(a) In the case of an instrument payable to the employer, a forged indorsement
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 indorsement purporting to be that of the person identified as payee.
3. "Responsibility" with respect to instruments means authority to:
(a) Sign or indorse instruments on behalf of the employer;
(b) Process instruments received by the employer for bookkeeping purposes, for
deposit to an account or for other disposition;
(c) Prepare or process instruments for issue in the name of the employer;
(d) Supply information determining the names or addresses of payees of instruments
to be issued in the name of the employer;
(e) Control the disposition of instruments to be issued in the name of the
employer; or
(f) 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 indorsement of the
instrument, the indorsement is effective as the indorsement 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 failure to exercise ordinary care contributed
to the loss.
C. Under subsection B, an indorsement 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 indorsed, is deposited in a depositary bank to an
account in a name substantially similar to the name of that person.
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