Levy v. American Mutual Liability Insurance

Marbury, C. J., delivered the opinion of the Court. This is a suit on an insurance policy brought by the appellants. A demurrer to the amended declaration was sustained by the trial court without leave to amend, and from a judgment in favor of the defendant for costs, the plaintiffs appealed. The policy sued on is what is known as a comprehensive crime policy, covering dishonesty of employees, burglary, theft, safe burglary, inside robbery, kidnapping, outside robbery, paymasters’ robbery, destruction of or damage to monies and securities, money orders and counterfeit ⁵⁴⁰ paper currency, forgery of issued instruments and forgery of accepted instruments.

This suit is brought under Clause A covering dishonesty of employees. That clause reads “To indemnify the insured for all loss of property due to the fraud or dishonesty of any of the insured’s employees, whether acting alone or in collusion with others.” It is not contended in this case that the loss sued for was not occasioned by the fraud or dishonesty of an employee. The key word, however, of Coverage A is “property”. The policy contains definitions of certain words whenever used in the policy.

One of these definitions is of the word “property”, which is said to be “Money, securities, merchandise, furnishings, fixtures, equipment or other personal property owned by the insured or held by the insured as pledgee, bailee, trustee, custodian, or agent, whether or not the insured is legally liable for the loss or damage thereof.” The facts alleged which it is contended render the appellee liable are these. The appellants are engaged in the business of selling shirts, uniforms, caps, etc. One of their full-time employees, who was on a straight salary basis, accepted an order for some uniform caps from a cab company, an established customer of the appellants. The appellants did not themselves manufacture these.caps, and this employee placed the order with the appellant’s regular source of supply. When they were ready, he had them billed to himself, took them to the cab company, received the money, paid the source of supply and retained the balance for his own use.

Subsequently, he told the cab company that appellants could no longer supply them, but that he would, and later orders he had billed in his own name, and filled them in the same manner as he had in the first order. He then used this scheme as a pattern to divert to his own use other orders from other established customers of the appellants, by telling them that the appellants were no longer able to supply them, but that he could. The losses which the appellants claim, by reason of the diversion or appropriation of these contracts by their em ⁵⁴¹ ployee, amount to in excess of $13,500. It appears that the employee received a salary in 1945 of $2,189.90, in 1946 this was increased to $2,898, in 1947, $3,080, and in 1948, up to August, when his actions were discovered, he had received $2,054.

On these facts the appellants claim that they sustained a loss of property within the meaning of the policy. One theory is that they lost money which they would have received on the diverted contracts, or the personal property of the contracts themselves, and the other is that they lost the money they were paying the employee for his entire services during the period when the diversion occurred. It is not contended by the appellee that