Credit card loss: Theft vs. 'voluntary parting'

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Question: We insured a sports apparel store. Someone went in to buy sneakers, and used a credit card to buy them. Days later, the credit card company would not deposit the funds to the merchant (because it turns out the customer) used a fraudulent credit card.

Is this considered theft under the policy?

I do not believe there is any direct physical loss, as the items we sold and a transaction took place.

After reviewing our sf-4 policy and our general agreement sf-20: Do you believe coverage exists?

— New York subscriber

Answer: This loss is excluded under the exclusion for voluntary parting. The employee was given a bogus credit card to purchase sneakers; the employee processed the transaction based on the belief that the credit card was legitimate. That is voluntary parting.

The credit card company refusing to deposit the funds isn’t a theft of funds per se. But the loss of the sneakers based on the belief that the card was legitimate constitutes voluntary parting, which is excluded.

See also: Know the difference: False pretense vs. theft coverage