Employee theft is often an exclusion in commercial insurance policies.
When fashion retailer Ted Baker found that it had suffered a major loss due to employee theft of stock, AXA, the company’s insurer, declined to meet the claim on the ground that Ted Baker had not taken out the cover offered for employee theft.
The total losses to Ted Baker were approximately £4 million – £1 million for the loss of the stock and £3 million for the consequential loss to the business.
The policy taken out had not specifically excluded losses due to employee theft, however. That was sufficient reason for the High Court to rule that the fact that such an exclusion was ‘market practice’ was not sufficient to mean that the policy excluded theft. Furthermore, Ted Baker had deleted the specific exclusion for consequential losses arising from theft or attempted theft.
The result was that Justice Elder ruled that the loss was covered by the policy. It remains to be seen if AXA will appeal the decision. Nonetheless, it underlines the wisdom of making sure that insurance policies are fully understood and do address the risks for which insurance is sought.
If you are concerned about the meaning of clauses in your insurance policies, contact us for advice.