Even the most trusted employees can turn out to be rogues. A distributor of designer clothes discovered the truth of that maxim to its cost after a warehouse manager stole stock valued at more than £2 million over a five-year period.
The company had mistakenly attributed substantial losses from its distribution warehouse to faults in its computerised stock control system. In fact, the manager had been thieving throughout his employment and, in cahoots with delivery drivers, had spirited away many thousands of desirable garments.
When police raided his home, they found his wife and children dressed in the company’s clothes and the house, as well as the garden shed and garage, ‘jam packed’ with stolen stock worth over £300,000. The man’s booty filled 14 pallets and took a 7.5 tonne lorry to retrieve. He was subsequently jailed for three years after pleading guilty to conspiracy to steal.
The company launched proceedings against its insurers, who had refused to pay out for the interruption of its business and loss of profits occasioned by the thefts. At a preliminary hearing, it successfully argued that the relevant insurance policies covered instances of employee theft. The company put its losses at more than £2 million.
However, in dismissing the entirety of its claim, the High Court accepted the insurers’ plea that the company had failed when requested to provide certain information and documentation, as required by the terms of the policies. There had been about 500 incidents of theft and the £5,000 policy excess in respect of each incident was also fatal to the claim.
The Court reached its decision ‘without any great enthusiasm’. It was agreed that the company’s losses arising from its employee’s gross breach of trust came to at least £2.16 million and it had already spent £2.5 million on legal costs before the case came on for trial.