                                 CODE OF VIRGINIA

EMPLOYER&#8217;S RESPONSIBILITY FOR FRAUDULENT ENDORSEMENT BY EMPLOYEE (§
8.3A-405)

a. In this section:

   1. &#8220;Employee&#8221; includes an independent contractor and employee of
   an independent contractor retained by the employer.

   2. &#8220;Fraudulent endorsement&#8221; means (i) in the case of an instrument
   payable to the employer, a forged endorsement 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 endorsement purporting to be that of the
   person identified as payee.

   3. &#8220;Responsibility&#8221; with respect to instruments means authority
   (i) to sign or endorse instruments on behalf of the employer, (ii) to process
   instruments received by the employer for 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 of instruments to be issued in the name of
   the employer, (v) to control the disposition of instruments to be issued in
   the name of the employer, or (vi) to act otherwise with respect to instruments
   in a responsible capacity. &#8220;Responsibility&#8221; 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 failure to exercise ordinary care
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 (i) it is made in a name substantially similar
to the name of that person or (ii) 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.

HISTORY: Code 1950, § 6-361; 1956, c. 149; 1964, c. 219, § 8.3-405; 1992, c.
693.