There are various versions of the mysterious loss exclusion such as:

– disappearance, unexplained or inventory shortage;

– mysterious disappearance, loss or shortage disclosed on taking inventory or any unexplained loss;

– disappearance, unexplained or inventory shortage, misfiling or misplacing of information.

In a sense, this type of exclusion may be unnecessary because the assured is obliged under any policy (including an ARPI policy) to prove that:

– the loss has occurred on the balance of probabilities; and

– the loss was accidental.

If, for example, the stock inventory is short and the assured has no other information, then it is difficult to see how the assured could prove its loss satisfactorily. Indeed, it may be harder for the insurer to prove that the alleged loss fell within the exclusion!

However, simply because a loss or shortage of property is first disclosed upon taking an inventory7, it does not mean that the insurer can continue to deny liability when subsequent evidence demonstrates that the loss clearly fell within the ARPI policy.

The limits of the exclusion can be seen in another US case, namely Miller v. Boston Insurance Co., 420 Pa 566, 218 A-D 275 (1966), in which an assured jeweller had consigned a ring to a particular dealer. The dealer had stated that he had the ring in his pocket and was trying to sell it. The next day he was found dead in the river with the ring missing. The insured jeweller was covered for all risks under the policy except unexplained loss, mysterious disappearance or loss or shortage disclosed on taking inventory. The ring was missing but the jeweller was held to be covered as the insurer failed to prove that the loss fell within the exclusion.

In other words, the court must determine whether or not the assured has done enough to prove that the loss fell within the policy.