Mysterious Disappearance, Loss or Shortage Disclosed on Inventory, Intentional Acts & Inherent Vice
An exclusion is a provision of an insurance policy referring to hazards, perils, circumstances, or property not covered by the policy. Exclusions are usually contained in the coverage form or causes of loss form used to construct the insurance policy.” [IRMI Online Glossary of Insurance & Risk Management Terms https://www.irmi.com/online/insurance-glossary/terms/e/exclusion.aspx (last visited Mar. 8, 2017)]. Intentional Act “One common exclusion is a clause that prohibits coverage for an intentional loss.” Mysterious Disappearance The term “mysterious disappearance” first appeared in insurance policies in 1943. Johnson v. General Accident, Fire & Life Assur. Corp., 454 S.W. 2d 837, 838 (Texas California Civil Code. App. 1970). The term has been defined several ways, but all share the sense of an unexplained loss. The term “mysterious disappearance” first appeared in insurance policies in 1943. Johnson v. General Accident, Fire & Life Assur. Corp., 454 S.W. 2d 837, 838 (Texas California Civil Code. App. 1970). The term has been defined several ways, but all share the sense of an unexplained loss. Shortage Disclosed on Inventory The “mysterious disappearance” exclusion is often paired with, or followed by, an exclusion for loss or shortage disclosed on taking an inventory because of the similarity of moral hazard raised by losses either unknown or not discovered until an inventory is taken. The inventory shortage exclusion is often misunderstood and misapplied. The exclusion, in simple, clear and unambiguous language states: “This policy does not insure against … [l]oss or shortage disclosed upon taking inventory.” Inherent Vice Inherent vice relates to internal decomposition or some quality which brings about the object’s own injury or destruction, not an extraneous cause. [Employers Casualty Company v. Holm, 393 S.W. 2d 363, 367 (Tex. Civ. App. 1965).] The subjective test for fortuity raises questions regarding whether the inherent vice exclusion is effective. © 2021 – Barry Zalma