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Dishonestly Exclusion Bars Coverage of Claim Alleging that Part-Time Employee Facilitated a Theft by Others

Blogs, Insurance Coverage

n its March 4, 2015, decision Union Hill Supremo Pharmacy v. Franklin Mutual Ins. Co., No. L–705–13 (N.J. App. Ct. 2015), the Appellate Court of New Jersey ruled that the dishonesty exclusion in a business owner’s insurance policy issued to a pharmacy precluded coverage of its claim that a part-time employee facilitated the theft of merchandise committed by others on her day off. Following the theft, the pharmacy submitted a claim to its insurer Franklin Mutual Insurance Company (“Franklin”). Franklin disclaimed coverage under the policy’s “disappearance or dishonesty exclusion” which excluded from coverage any “criminal, dishonest, or fraudulent acts by, or instigated by, you or your … employees.


The trial court granted summary judgment in favor of Franklin. The pharmacy appealed, and the Appellate Court rejected the pharmacy’s argument that a part-time, hourly employee, should not be considered an “employee” under the policy, especially for criminal actions taken during non-working hours. The Court found, that the term “employee” was not ambiguous and, that under the “plain language” of the policy, a part-time employee was considered an “employee” subject to the “disappearance or dishonesty exclusion.” Irrespective of the fact that the employee allegedly committed the criminal acts only during non-working hours, she used her knowledge as an employee of the pharmacy to acquire the tools necessary to facilitate the theft. Thus, the Court concluded that it was of little consequence when the crime occurred.