TED BAKER PLC AND ANOTHER V AXA INSURANCE UK PLC AND OTHERS

[2012] EWHC 1406 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Eder, 25 May 2012

Insurance (property and business interruption) - Whether employee theft was excluded - Construction - Estoppel by convention - Rectification - Misrepresentation

TB sold merchandise through retail outlets. Between early 2006 and December 2008 TB noticed losses at a London warehouse but was unable to identify the cause. On 12 December, following a tip-off, an employee in charge of processing returns of stock was arrested. He was, along with two accomplice van drivers, charged was stealing stock from the warehouse. On 13 March 2009 he pleaded guilty to conspiracy to steal between 10 September 2000 and 12 December 2008. Claims for loss of property and for business interruption were made against the defendant insurers. The Material Damage section of the policy excluded damage caused by ‘acts or frauds of dishonesty by the Insured's employees'. However, cover was provided by the Theft Extension Clause: "The insurance by this Section extends to cover loss or damage resulting from theft or any attempted thereat but the Insured shall be responsible for the first £1,000 of each and every loss which does not involve entry to or exit from the Premises by forcible and violent means". The Business Interruption section applied where there was insurance in place covering the loss of property, although it excluded consequential loss for all loss "arising directly from theft or attempted theft" (exclusion clause 2(c)) and "caused by or consisting of ... acts of fraud and dishonesty ..." (exclusion clause 4(c)). However, there was a special endorsement, headed "Theft Extension Clause" which stated "Exclusion 2(c) of the Cover is deleted". Exclusion clause 4(c) was not deleted. The insurers denied that employee theft was covered by the policy.