[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 15-10629

Non-Argument Calendar

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D.C. Docket No. 2:14-cv-00868-CSC

W.L. PETREY WHOLESALE CO., INC., 

 Plaintiff - Appellant,

versus

GREAT AMERICAN INSURANCE COMPANY, 

 Defendant - Appellee.

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Appeal from the United States District Court

for the Middle District of Alabama

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(August 6, 2015)

Before TJOFLAT, JULIE CARNES and JILL PRYOR, Circuit Judges.

PER CURIAM: 

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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, Petrey 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 

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 

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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 . . . [l]oss, 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 Petrey’s claim. 

Petrey timely appealed.

 1 Citations to “Doc.” herein refer to docket entries in the district court record in this case.

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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 

 2 Because this is a diversity case concerning an Alabama insurance contract, we apply 

Alabama substantive law. St. Paul Fire & Marine Ins. Co. v. Era Oxford Realty Co. Greystone, 

LLC, 572 F.3d 893, 894 n.1 (11th Cir. 2009). Petrey does not contend otherwise.

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business’s self-created inventory records (for example, as a result of negligence or 

improper bookkeeping). See American Fire & Casualty Co. v. Burchfield, 232 So. 

2d 606, 609 (Ala. 1970). Petrey does not argue that the exclusion is ambiguous. 

We therefore must consider whether Petrey’s claims for missing inventory 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, 

Sec[u]rities 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 

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provisions of the policy preclude 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. But this 

argument is circular, as Petrey has supported these assertions only with order and 

sales records — which boil down to inventory comparison computations. See Fid. 

& Deposit Co. of Md. v. So. Utils., Inc., 726 F.2d 692, 695 (11th Cir. 1984) (“An 

 3 Petrey argues on appeal that the fact that Bree vanished after he was fired is evidence

that he stole the 5-Hour Energy bottles. Petrey did not make this argument to the district court,

see Access Now, Inc. v. Southwest Airlines Co., 385 F.3d 1324, 1329-30 (11th Cir. 2004)

(declining to consider argument raised for the first time on appeal); but, in any event, the record 

contradicts Petrey’s assertion that Bree disappeared after he was confronted about the missing 

inventory. Petrey only discovered the shortage a month after Bree’s termination for reasons 

unrelated to theft, and only then did Petrey attempt to contact Bree with “no success.” Parks 

Affidavit, Doc. 21-1 at 25-26.

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inventory computation is an inventory arrived at by taking a beginning inventory, 

adding purchases and deducting the cost of merchandise sold.” (internal quotation 

marks omitted)). Burchfield requires independent evidence of employee 

dishonesty, which is absent here.

Petrey also argues that it provided independent evidence of employee 

dishonesty by showing that only Petrey employees had access to Bree’s inventory. 

We agree with the Second Circuit that “circumstantial evidence that, if a loss in 

fact was sustained, [the insured’s] employees were the perpetrators” is not 

independent evidence of the existence of a loss. Dunlop Tire & Rubber Corp. v. 

Fid. & Deposit Co. of Md., 479 F.2d 1243, 1247 (2d Cir. 1973). Petrey’s assertion 

that only its employees could have stolen the 5-Hour Energy bottles “presupposes 

the factual existence of a loss” and “merely tends to foreclose the possibility of 

theft by persons other than employees,” rather than prove that employees stole 

anything from the company. Id.

Finally, Petrey argues that Great American’s own prior coverage 

determinations show that the inventory shortage exclusion does not apply here. In 

2011, Petrey filed a claim for theft of merchandise worth $102,897.05 by an 

employee, Jason McKean. The same Crime Prevention Policy was in place then, 

and the policy included the same inventory shortage exclusion that is at issue here.

Great American paid the claim to Petrey in full without contest. Petrey now argues 

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that because the claim for Bree’s theft was essentially identical, it too should be 

covered by the policy. But Alabama law forbids courts from using extrinsic 

evidence (such as the parties’ course of dealing) to interpret an unambiguous 

contractual provision. Drummond Co. v. Walter Indust., 962 So. 2d 753, 780 (Ala. 

2006). Petrey does not argue that the inventory shortage exclusion is ambiguous, 

and we think the provision is clear on its face. We therefore may not consider the 

extrinsic evidence relating to the McKean claim when interpreting the exclusion.4

Because Petrey cannot point to any evidence of loss by employee theft other 

than its own inventory comparison computations, the loss was excluded from 

coverage. The district court properly granted summary judgment to Great 

American.

AFFIRMED.

 4 Similarly, Alabama law prevents Petrey from using the McKean claim to argue that 

Great American has waived its right to exclude the Bree claim from coverage. See Home Indem. 

Co. v. Reed Equip. Co., 381 So. 2d 45, 50-51 (Ala. 1980) (“[T]he doctrine [of waiver] is not 

available to bring within the coverage of a policy risks not covered by its terms or risks expressly 

excluded therefrom.”).

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