§490:3-405  Employer 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 (i) in

the case of an instrument payable to the employer, 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 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.

              "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 to 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 (i) it is

made in a name substantially 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 a name substantially similar to the name of that person. [L 1991, c

118, pt of §1]