Ted Baker PLC v. AXA Insurance UK, PLC
([2012] EWHC 1406 (Comm))
This recent case looks at the interpretation of a commercial combined insurance policy, and, particularly, whether the policy covered theft by employees even though the insured, Ted Baker, did not take out a section of the policy related to employee theft.
During a check on stocks, Ted Baker discovered that one of its employees had been stealing stock from the warehouse over an 8-year period. Ted Baker sought indemnity from its insurers, AXA, for the stolen stocks, and for business interruption as a result of the theft.
The relevant insurance policy included a theft section containing an endorsement which stated: “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.” However, the insured did not elect to include one of the sections of the insurer’s standard wording – the Theft by Employees Section (or Fidelity Cover) – in its policy. Therefore, AXA declined cover on the basis that, as a matter of construction, the policy did not cover employee theft.
The court rejected AXA’s arguments, stating that the fact that Ted Baker did not take out the specific section dealing with employee theft did not mean that the policy as a whole did not provide “full” theft cover. Further, the policy did not specifically exclude theft by employees. Therefore, “as a matter of construction of the wording of the policy, there [was] cover for employee theft under the Theft section.”
The court noted that the policy was clear and therefore 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. As a result, the court determined that Ted Baker’s policy responded to the loss.
Impact on Insurance/Reinsurance: This case reminds insurers to ensure that policies are clearly drafted and that all aspects of the insurance are properly and fully considered and documented. It is vital to ensure that excluded events are clearly set out if necessary and that exclusion and insuring clauses fit together.
For a copy of the decision, click here.