Georgia Property & Casualty Practice Exam

How does a commercial crime policy respond to a claim involving missing stock?

1. It pays the claim under Employee Theft coverage.

2. It pays the claim under Other Property coverage.

3. It denies the claim under the Warehouse Receipts exclusion.

4. It denies the claim under the Inventory Shortages exclusion.

The correct answer is: It denies the claim under the Inventory Shortages exclusion.

A commercial crime policy specifically addresses various forms of theft and fraud that can affect a business. In the case of missing stock, the policy would typically evaluate the cause of the loss to determine if coverage is applicable. The correct answer reflects the fact that many commercial crime policies contain an Inventory Shortages exclusion. This exclusion generally applies when there are discrepancies between inventory records and physical stock without evidence of a specific theft incident. Therefore, if the missing stock is attributed to inventory shortages—such as bookkeeping errors or unaccounted stock rather than an actual theft—the claim would be denied. In contrast, Employee Theft coverage, mentioned in another option, specifically covers incidents where employees are responsible for stealing from the business. If the claim involved missing stock but did not derive from an identified employee's criminal acts, this coverage would not apply. Similarly, Other Property coverage is not relevant in this context as it typically does not cover stock losses related to theft or inventory discrepancies. The Warehouse Receipts exclusion pertains to the coverage limitations associated with property stored in warehouses, which is not directly relevant to the issue of missing stock unless it specifically involved a storage scenario. However, in standard instances of inventory loss due to shortages, the Inventory Shortages exclusion is the primary consideration.