W.L. Petrey Wholesale Co., Inc. v. Great American Insurance Company

622 F. App'x 849
CourtCourt of Appeals for the Eleventh Circuit
DecidedAugust 6, 2015
Docket15-10629
StatusUnpublished
Cited by2 cases

This text of 622 F. App'x 849 (W.L. Petrey Wholesale Co., Inc. v. Great American Insurance Company) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
W.L. Petrey Wholesale Co., Inc. v. Great American Insurance Company, 622 F. App'x 849 (11th Cir. 2015).

Opinion

PER CURIAM:

In this case, W.L. Petrey Wholesale Company (“Petrey”) appeals the district court’s summary judgment in favor of defendants Great American Insurance Company (“Great American”). After careful consideration of the parties’ briefs and the record, we affirm.

I.

Petrey sells wholesale goods and supplies to convenience stores through a network of sales people. Justin Bree was a route salesperson for Petrey in central and southern Indiana from 2007 until 2013, when he was fired because his primary customer requested that he not service its stores any longer. Route salespersons are required to drive a Petrey company truck and to rent a storage facility in which to store Petrey inventory. When Bree was fired, Petrey took possession of his delivery truck and its contents, his computer equipment, and the storage unit where Bree kept Petrey’s inventory.

A month after Bree’s termination, Pe-trey discovered that the inventory in the storage unit was short by 82,510 bottles of 5-Hour Energy products, worth $111,415.35. Petrey audited Bree’s route inventory records and took a physical *851 count of the route inventory in the storage unit; a comparison of the physical inventory count with the computer generated perpetual inventory count revealed a shortage of physical inventory. An additional comparison of the physical inventory count with the records of all route transactions involving 5-Hour Energy products confirmed the exact shortage amount of 82,-510 bottles. Petrey also compared Bree’s orders for those products with his sales, which revealed a pattern of Bree’s ordering more 5-Hour Energy products than his sales would have required.

Petrey filed a claim with its insurance company, Great American, under a Crime Protection Policy, which insured against “loss of, and loss from damage to, money, securities and other property resulting directly from dishonest acts committed by an employee.” Crime Protection Policy, Doc. 17-2 at 6. 1 Great American denied the claim based on the inventory shortages exclusion in the policy, which read: “We will not pay for ... [ljoss, or that part of any loss, the proof of which as to its existence or amount is dependent upon: (a) An inventory computation; or (b) A profit and loss computation.” Id. at 11.

Petrey filed this action for breach of the insurance contract and subsequently added a claim for bad faith. Great American filed a motion to dismiss or, in the alternative, for summary judgment based solely on the inventory shortage exclusion. The district court granted the motion for summary judgment, concluding that the inventory shortage exclusion applied and barred Petre/s claim. Petrey timely appealed.

II.

We review a district court’s grant of summary judgment de novo. Liese v. Indian River Cty. Hosp. Dist. 701 F.3d 334, 341 (11th Cir.2012). “At this stage in the proceedings we are required to view all of the evidence in a light most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor.” Id. at 342 (internal quotation marks omitted). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

III.

Under Alabama law, 2 to prevail on either its breach of contract or bad faith claim, Petrey must show that the loss is covered by the insurance policy. See State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 258 (Ala.2013). Here, it is undisputed that the policy covers loss of property caused by employee theft. But the insurance policy expressly excludes employee theft claims that are dependent upon proof of loss by an inventory calculation or profit and loss calculation. Such exclusions are intended to protect insurers from errors that may be inherent in a business’s self-created inventory records (for example, as a result of negligence or improper bookkeeping). See American Fire & Casualty Co. v. Burchfield, 285 Ala. 358, 232 So.2d 606, 609 (1970). Petrey does not argue that the exclusion is ambiguous. We therefore must consider whether Petrey’s claims for missing inventory *852 are based upon either type of prohibited calculation.

In Burchfield, the Alabama Supreme Court confronted a similar insurance policy provision, which excluded from coverage a

loss, or [ ] that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of Money, Securities or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees.

Id. at 607. The plaintiff, a wholesale grocer, filed a lawsuit against its insurer claiming coverage for a loss due to employee theft. A jury entered an award for the grocer based on an inventory computation. The insurance company sought a new trial, arguing this evidence was excluded by the insurance policy. The, Alabama Supreme Court rejected the argument, holding that “the prohibition is against recovery on proof of inventory loss alone.” Id. at 609. The prohibition did not apply to the grocer because it had offered independent proof, in the form of sworn affidavits by three of its employees that they stole company property, of the loss it suffered as a result of employee dishonesty: “[W]e do not believe that the provisions of the policy pre: elude after that proof has been made, the use of inventory records to show the amount of the loss.” Id.; see also Fidelity & Deposit Co. v. Southern Utilities, Inc., 726 F.2d 692, 695 (11th Cir.1984) (“More recent decisions tend to allow an inference of employee dishonesty to be drawn from relatively thin circumstantial evidence and then to permit the full extent of the losses to be- proven by inventory comparisons. Generally, these cases have required some proof of dishonesty by employees as a condition precedent to the admission of inventory comparisons to establish the full amount of loss.”).

Petrey has provided no independent evidence of Bree’s theft; it relies solely on inventory' comparisons to prove the claimed loss. 3 Petrey argues that its physical inventory count provided independent evidence by showing that Bree ordered the goods in question, received them from Petrey, did not deliver them to his customers, and did not have them on hand in his storage locker.

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622 F. App'x 849, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wl-petrey-wholesale-co-inc-v-great-american-insurance-company-ca11-2015.