NOTE –
This is from our older court case archives. It may involve situations that are
inapplicable to newer coverage forms. Please be aware of this possibility when
reading and using this case.
Proof
of Employee Theft Held to Require More Than Inventory Loss
|
Crime
Insurance |
Employee Theft |
|
Inventory |
Breach of Contract |
An insurer
denied liability under Employee Dishonesty insurance carried by a manufacturer
and retailer of toys for the alleged theft by employees of approximately
$280,000 of merchandise from a warehouse. Claim had been made after a physical
inventory count revealed that the merchandise was missing, the insured
asserting that the loss occurred between the previous count and the current
one.
The insured
brought legal action against the insurer for breach of contract. The insurer
moved for summary judgment dismissing the action, claiming the insured offered
no evidence of employee theft other than inventory shortage determined from
records and physical count.
The insuring
agreement provided that the company “…shall be liable for direct losses of
Money, Securities and other property caused by theft or forgery by any
identifiable Employee(s) of any Insured acting alone or in collusion with
others.”
A pertinent
exclusion stated that the coverage did not apply to “…loss or that part of any
loss the proof of which involves in any manner (1) a profit and loss
computation or comparison or (2) a comparison of inventory records with an
actual physical count; provided, however, that where the Insured establishes
wholly apart from such comparison that it has sustained a loss covered under
Insuring Clause I, then it may offer its inventory records and actual physical
count of inventory in support of the amount of loss claimed.”
The insured pointed
out that the term “inventory records” was not defined in the policy and was ambiguous, arguing that an insurer could avoid liability by
claiming any document was an “inventory record.”
The court
concluded that pertinent exclusion clearly eliminated coverage for a loss where
proof depended on comparison of inventory records with physical count. It found
no ambiguity in the language and that the insured failed to demonstrate
employee theft apart from the inventory.
The insurer’s
motion for summary judgment dismissing the complaint of the insured was
granted. The coverage was found to be not applicable to the loss.
Azrak-Hammay International, Inc., Plaintiff v. Home Insurance Company, Defendant. New York Supreme Court, New York County, 200 N.Y.L.J., No. 80, p. 22. October 25, 1988. CCH 1988-89 Fire and Casualty Cases, Paragraph 1446.