Employee theft case sheds light on policy construction - International Law Office

In Ted Baker Plc v Axa Insurance UK the insured discovered that one of its employees had been stealing stock from its warehouse and sought an indemnity from its insurers. The relevant insurance policy had a number of discrete sections, including a section on theft which contained an endorsement providing that:

"the insurance by this Section extends to cover loss...resulting from theft or any attempt thereat but the Insured shall be responsible for the first £1,000...which does not involve entry to or exit from the Premises by forcible and violent means."

One of the sections of the insurer's standard wording - the 'theft by employees' section - was not selected by the insured and did not form part of the policy issued to it. Nonetheless, the judge held that there was cover under the theft section of the policy "and the wording should be given its plain meaning, namely that theft means theft, including theft by employees as this is not otherwise excluded".

The judge further held that there was no customary usage of the expression "theft or any attempt thereat", and that underwriters' subjective views as to how cover should work were inadmissible. He also rejected an argument that something was wrong with the wording because the insured's construction was contrary to business common sense or that market practice assisted the insurers' arguments. He held that Rainy Sky v Kookmin did not apply to this case because there were not two competing constructions of the words used.

The judge acknowledged that in Mopani Copper Mines v Millennium Underwriting it had been held that deleted words in a policy may be looked at in certain circumstances. However, he concluded that in this case, the policy was clear; thus, it was not permissible to take into account the insured's non-selection of the 'theft by employees' section as an aid to construction of the theft section of the policy. In any event, the former could not have been selected without amendment in this case and so, even if the non-selection had been taken into account, it would not have helped the insurer.

For further information on this topic please contact Nigel Brook at Clyde & Co by telephone (+44 20 7623 1244), fax (+44 20 7623 5427) or email (nigel.brook@clydeco.com).