I can't imagine your employees are going to feel great about this if the insurance company pays out. Put yourself in their position, even if you explain to them your stance on this, they wouldn't be human if part of them felt you hadn't fully believed them and backed them up. I'd had lost respect for my boss in any previous job I've had if he didn't back me up if someone had challenged my integrety like this, don't forget, your employees have totally denied it happened so in effect the customer is calling them liars, I'd want to know my boss had 100% trust in me and had my back. Hope it all works out Richard, I don't envy you this situation but if you value these lads then I think you've made a mistake.