In Nussbaum Diamonds, LLC v. Hanover Insurance Co., 2009 NY Slip Op 05982 (July 28, 2009), Plaintiff had a $4M policy with defendant that included “all risk” coverage up to $500,000 for losses occurring outside the premises when jewels were entrusted to a named individual. The policy contained a “mysterious disappearance” exclusion limiting coverage to $250,000 less the $10,000 deductible.

While on a sales trip, a named individual discovered that he lost plaintiff’s jewels somewhere along the route. Defendant disclaimed the full $500,000 coverage, citing the “mysterious disappearance” exclusion, but agreed to pay $240,000 ($250,000 less the deductible).

Plaintiff commenced an action for breach of contract and moved for summary judgment, contending that it was entitled to full $500,000 “all risk” coverage. The lower court denied the motion for full coverage, but granted partial summary judgment to the extent of $240,000. On plaintiff’s appeal, the Appellate Division, First Department, affirmed.

The Court stated that under an “all risk” policy, plaintiff must demonstrate: 1) the existence of a valid all risk policy; 2) an insurable interest in the subject of the policy; and 3) fortuitous loss of covered property. Although the Court found that the plaintiff met this burden, it also found that defendant raised issues of fact regarding the events preceding the loss, thus meeting its burden under the “mysterious disappearance” clause that there was no plausible explanation for the loss of the jewels.

Thanks to Robin Green for her contributions to this post!

http://www.courts.state.ny.us/reporter/3dseries/2009/2009_05982.htm