Opinion ID: 1010397
Heading Depth: 4
Heading Rank: 1

Heading: Acting alone or in collusion with others; or

Text: (2) Whether or not occurring during the hours of employment. This exclusion does not apply to acts of destruction by your employees; but theft by employees is not covered. Form, ¶ B(2)(e) (emphasis in original). The district court held that NMS placed its computer systems in the entrustment of the former employee [Powell] for their care and performance during his tenure. NMS Servs., Inc. v. The Hartford Fire Ins. Co., Civil Action 01-667- A (E.D. Va. Dec. 7, 2001). The district court found that because Powell was entrusted with NMS’s property while still employed at NMS, NMS was precluded from coverage by the dishonesty exclusion of the Special Property Form. If the district court’s reasoning was correct, then any dishonest or criminal act committed by an employee (or former employee) that damaged property would preclude coverage if that employee had also been entrusted with the property. Such an interpretation would render the exception meaningless. Most employees, to some extent, are entrusted with property, but not all persons entrusted with property are employees. Therefore, where the entrusted person is also an employee, both the dishonesty exclusion clause prohibiting coverage for dishonest or criminal acts by an employee and the exception to the exclusion apply. NMS SERVICES INC. v. THE HARTFORD 5 It is undisputed that Powell installed the software which allowed him to destroy NMS’s data while he was still an employee of NMS. Powell’s actions on July 21, 2000, were the final step in carrying out his plan. Without the installation of the software, Powell could not have destroyed the data. The substantial portion of Powell’s actions took place while he was still an NMS employee, making Powell, for purposes of the dishonesty exclusion of the Special Property Form, an employee who committed a dishonest or criminal act. However, NMS’s property was not only damaged, but was completely destroyed by an employee, Powell, which triggers the exception to the dishonesty exclusion of the Special Property Form. Under the exception, acts of destruction by employees do not preclude coverage. Form, ¶ B(2)(e). Therefore, we find that the dishonesty exclusion of the Special Property Form does not preclude NMS’s coverage under the Special Property Form.