2010 Pennsylvania Code
Title 13 - COMMERCIAL CODE
Chapter 34 - Liability of Parties
3405 - Employer's responsibility for fraudulent indorsement by employee.

     § 3405.  Employer's responsibility for fraudulent indorsement by
                employee.
        (a)  Definitions.--As used in this section, the following
     words and phrases shall have the meanings given to them in this
     subsection:
        "Employee."  Includes an independent contractor and employee
     of an independent contractor retained by the employer.
        "Fraudulent indorsement."
            (1)  In the case of an instrument payable to the
        employer, a forged indorsement purporting to be that of the
        employer.
            (2)  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.
        "Responsibility."  With respect to instruments means
     authority:
            (1)  to sign or indorse instruments on behalf of the
        employer;
            (2)  to process instruments received by the employer for
        bookkeeping purposes, for deposit to an account or for other
        disposition;
            (3)  to prepare or process instruments for issue in the
        name of the employer;
            (4)  to supply information determining the names or
        addresses of payees of instruments to be issued in the name
        of the employer;
            (5)  to control the disposition of instruments to be
        issued in the name of the employer; or
            (6)  to act otherwise with respect to instruments in a
        responsible capacity.
     The term 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)  Rights and liabilities.--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)  Application.--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.

        Cross References.  Section 3405 is referred to in sections
     3417, 4208 of this title.