Which of the following is an exclusion under Employee Theft Coverage?

Employee Theft Coverage is specifically designed to protect businesses from losses due to the dishonest acts of their employees, such as theft or embezzlement. The correct exclusion in this context is inventory shortages unless proven to be caused by employees.

Inventory shortages typically refer to discrepancies in inventory counts that can arise for a variety of reasons, such as theft (from employees or external sources), administrative errors, or even market fluctuations. This exclusion is critical because it emphasizes the need for direct evidence linking any losses to employee actions rather than attributing them to general operational inefficiencies or external factors. As such, unless there is clear proof that an employee's dishonest actions led to the shortage, the coverage does not apply.

In contrast, loss caused by external theft, natural disasters, and losses due to employee negligence can fall outside the purview of Employee Theft Coverage for different reasons, but they do not pertain to the dishonesty of employees. Understanding these exclusions helps clarify how Employee Theft Coverage works and the specific scenarios it is intended to address, reinforcing the importance of establishing a direct link to employee theft for a claim to be valid.