In Union Hill Supremo Pharmacy v. Franklin Mut. Ins. Co., No. L-705-13 (N.J. Super. Ct. App. Div., March 4, 2015) the Superior Court of New Jersey, Appellate Division decided that an insurance policy’s definition of “employee” was unambiguous. The court further held that a part-time employee fell within the definition of “employee” and that a policy exclusion based on an “employee’s” criminal acts applied even when the employee was not working at the time of the crime’s commission.
The insured, a pharmacy, incurred a $300,000 loss in stolen merchandise after being robbed by three men. The insured’s employee, a technician’s assistant, was an accomplice. The employee figured out the insured’s security code on her day off by watching another employee type in the numbers. She also made a copy of a key to the pharmacy. She then supplied both the security code and the key to the men who committed the robbery.
The insured submitted its claim to its insurer, who disclaimed on the basis of an exclusion. The exclusion precluded coverage for “…Criminal, dishonest, or fraudulent acts by, or instigated by, you or your directors, employees, officers, partners, or trustees or other insureds, or by anyone given possession of property, other than a Bailee for hire.” The policy defined “employee” as “a person employed by you and includes a leased worker. Employee does not include a temporary worker or independent contractor.” The insured commenced a declaratory action against the insurer, but the trial court granted summary judgment to the insurer. The insured appealed.
First, the insured argued that there was an issue of fact regarding whether the definition of “employee” was ambiguous and should be interpreted in the insured’s favor. The insured contended that the term did not apply to the technician’s assistant because she was a part-time, hourly employee. The court rejected this argument, stating that the policy did not exempt part-time employees from the definition of “employee”. The court further held that the definition of “employee” was not ambiguous.
Second, the insured argued that the exclusion is ambiguous and should only apply to employees who’s excluded conduct occurs during working hours. The court also rejected this argument. The court was also not persuaded that the employee in question committed the crime during non-working hours since she could only obtain the security code and copy the key by virtue of her knowledge of the pharmacy.
Accordingly, the court affirmed summary judgment in favor of the insurer.
The decision that the term “employee” as used in an insurance policy is not ambiguous has significant implications for insurers. Standard policies do not contain exhaustive definitions of who constitutes an “employee.” This decision shows that courts will not ordinarily strain to find an ambiguity where none exists in the ordinary meaning of a term.