The commercial insured in this case, is the business of shrimp importing and distributing. The insured had purchased a motor truck cargo liability insurance policy to cover the shrimp while in transit. On this particular occasion, it was discovered that between the time the shrimp were inspected by port authorities and the arrival of the shipment at the warehouse location, 200 cases of shrimp were missing and believed to be stolen.

It was determined that the insured's employee, the driver of the truck transporting the shrimp, had stolen the cargo. The driver eventually entered a guilty plea to the charges of theft. The insured's customer filed a negligent supervision suit against the insured for this reason.

The insurance company denied coverage based upon the exclusion in that policy relating to "loss or damaged caused by or resulting from (a) any fraudulent, dishonest or criminal act(s) committed alone or in collusion with others by: (1) the insured or any employee . . . " The insured then filed suit against the insurance company because of the denial of the claim based on the fact that the action against the insured was negligent supervision, not employee theft, which would have otherwise been covered by the policy. The contention was that an ambiguity existed--the actual suit against the insured was for one thing and the denial was based upon something different.

The original decision of the court was in the favor of the insurance company and against the insured. Upon appeal to the appeals division of the state superior court, it was determined that the exclusion regarding the dishonest or criminal act of the employee was clear and unambiguous. The act was undeniably criminal, as was the involvement of the driver especially in light of the guilty plea entered. The criminal or dishonest act exclusion superseded the negligent supervision action and the decision rendered in favor of the insurance company was affirmed.