What exclusions apply to the Employee Theft insuring agreement?

The correct response highlights a key aspect of the Employee Theft insuring agreement: it typically does not cover inventory shortages that are discovered solely through profit analysis. Such shortages may arise from many factors, including economic conditions or natural shrinkage, rather than direct employee theft.

Employee Theft coverage is designed specifically to protect against direct losses suffered due to dishonest acts committed by employees themselves. This means that if a loss cannot be directly linked to actions taken by an employee (such as taking cash or property), it may not be covered under this specific policy. Therefore, shortages uncovered through profit analysis do not fall under the purview of employee theft insurance.

The other options refer to losses that either do not involve employee actions (like losses due to past misconduct before coverage was in place) or losses that arise from fraud by third parties, which are not considered employee theft. Each of these types of losses is excluded from the protection offered under the Employee Theft agreement since they do not meet the specific definition of loss related to employee dishonesty.

In summary, the focus of the Employee Theft coverage is on direct actions of employees, and losses due to inventory shortages through profit analysis do not qualify as such, making it the correct choice.