Morrow Retail Stores v. Hartford Accident & Ind. Co.
| Decision Date | 04 May 1953 |
| Docket Number | No. 1813.,1813. |
| Citation | 111 F. Supp. 772 |
| Parties | MORROW RETAIL STORES, Inc. v. HARTFORD ACCIDENT & INDEMNITY CO. |
| Court | U.S. District Court — District of Idaho |
Herman J. Rossi, Wallace, and Paul S. Boyd, Boise, Idaho, for plaintiff.
William S. Hawkins and E. L. Miller, Coeur D'Alene, Idaho, for defendant.
Plaintiff brought this action to recover on an insurance policy, issued by the defendant, for merchandise inventory shortage, claimed to have been caused by fraudulent or dishonest acts of plaintiff's employees. A jury trial resulted in a verdict for plaintiff, but the trial court granted defendant's motion for a new trial. The parties have stipulated that the case may be tried before the court, without a jury, on the transcript of the testimony received and the exhibits admitted in evidence on the former trial.
Plaintiff's claim is based upon insuring agreement 1 of the policy, which has a liability limit of $5,000 and is designated "Employee Dishonesty Coverage." It insures against loss sustained through any fraudulent or dishonest acts of plaintiff's employees, acting alone or in collusion with others, including money and securities and other property and including that part of any inventory shortage "Which the Assured Shall Conclusively Prove to Have Been Caused by the Fraud or Dishonesty of Any of the Employees." The policy further provides that:
"If a loss is alleged to have been caused by the fraud or dishonesty of any one or more of the employees and the assured shall be unable to designate the specific employee or employees causing such loss, the assured shall nevertheless have the benefit of this insuring agreement 1, provided that the evidence submitted reasonably (in case of inventory shortage, conclusively) establishes that the loss was in fact due to the fraud or dishonesty of one or more of the said employees, * * *."
The sole question presented is whether the evidence, as it appears in the record of the former trial, is sufficient to sustain plaintiff's claim of loss under the provision, just quoted, of insuring agreement 1 of the policy. Summarized briefly, the evidence is as follows:
Plaintiff operated three stores in northern Idaho, but its claim for inventory shortage was based upon the operations of the dry-grocery and produce departments of its Mullan store, for the second and third quarters of the year 1949 and the first and second quarters of the year 1950. During that time, the two departments had the same manager and were physically separated from the other departments of the store. Plaintiff used what is known as the retail method of accounting. At the beginning of an accounting period, a physical inventory of the merchandise stock was taken on a retail price basis of valuation. To the inventory figure, there was then added the total amount of purchases of merchandise during the period, also on a retail basis, that is to say, wholesale cost plus mark-up, and there was subtracted the total merchandise sales, the mark-downs or reductions made in the retail prices of goods sold, and reported spoilage. The result thus arrived at represented the book inventory value. A physical inventory, taken at the close of the period, inevitably would show an amount less than the book inventory, and the shortage would represent the sum total of bookkeeping errors, errors in taking inventories, unreported mark-downs and spoilage, and losses due to outside burglary, customer pilferage, and theft by employees. Physical inventories, taken at the close of the period in which plaintiff claimed its loss occurred, showed such a shortage. There had been no loss by fire or outside burglary. Three different inventories were taken to eliminate, or at least minimize, the possibility of inventory errors. Bookkeeping errors, according to the testimony of plaintiff's witnesses, were very small and tended to cancel out by compensation. Thefts by customers, during the hours the store was open, except in very small quantities, were not possible without discovery by store employees. Moreover, the total of all the imponderable factors, including customer pilferage, was quite constant with little variation in times of normal operation, as shown by past experience in the Mullan store over a period of five years and did not exceed a certain percentage of the total sales. Subtracting that maximum percentage in order to make allowance for such imponderable factors, plaintiff's witnesses computed the inventory shortage, on a wholesale cost basis, to be $5586.24, a sum substantially in excess of the limit of liability of insuring agreement 1 of the policy. Thus, by a process of elimination of all other possible causes, they attributed the shortage to theft by unknown employees. Plaintiff's vice-president and general manager, who had a master's degree "in business" from Harvard University and more than forty years' experience in retail merchandising, testified that, in his...
To continue reading
Request your trial
-
Lumbermen's Mutual Casualty Co. v. Norris Grain Co.
...coverage, the legal significance and effect of the word "conclusively" is to be understood. In Morrow Retail Stores, Inc. v. Hartford Accident & Indemnity Company (D.C.Ida.) 111 F.Supp. 772, an insurance policy essentially indistinguishable from the one before this court was involved, and t......
-
Hoboken Camera Center, Inc. v. Hartford Acc. & Indem. Co.
...as we did in Reese: Savannah Wholesale Co. v. Continental Casualty Co., 279 F.2d 706 (5 Cir. 1960); Morrow Retail Stores v. Hartford Accident & Ind. Co., 111 F.Supp. 772 (N.D.Idaho 1953); Standard Brass & Mfg. Co. v. Maryland Casualty Co., 153 So.2d 475 (La.Ct.App.1963); cf. Leader Clothing......
-
New Amsterdam Cas. Co. v. WD Felder & Co.
...this loss must be shown by conclusive evidence, should be given a reasonable construction. See Morrow Retail Stores, Inc. v. Hartford Accident and Indemnity Co., D.C., 111 F.Supp. 772 at p. 774, and cases therein cited. Plaintiff's evidence seeking to prove loss by dishonesty of employees i......
-
Standard Brass & Mfg. Co. v. Maryland Cas. Co.
...Washington, D.C., Corporation v. Indemnity Insurance Company of North America, D.C., 182 F.Supp. 748; Morrow Retail Stores, Inc. v. Hartford Accident & Indemnity Co., D.C., 111 F.Supp. 772; Couch's Cyclopedia of Insurance Law, Vol. 8, § 2241; 169 A.L.R. 228 et seq.; Leader Clothing Co. v. F......