A common legal issue faced in many jewelry losses is whether goods freely provided by the insured jeweler to a third-party — and then not returned — constitutes a physical loss covered under the policy. Many courts across the country have held that, absent a specific exclusion, such a loss is fortuitous and covered under a typical property policy.
Recently, a California appellate court upheld one of those key exclusions in PNS Jewelry v. Penn-America Ins. Co. PNS is a jewelry wholesaler, and delivered more than $1.5 million in jewelry and watches to a thief posing as an armored car worker. The insurer denied coverage, citing the Voluntary Parting exclusion, which stated there was no coverage for “..voluntary parting with any property by [PNS] or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.”
PNS sued for breach of contract, arguing that “voluntary” means the insured acted with full knowledge of the facts and consequences of its actions. In essence, it argued that if an insured is induced to deliver property by fraud or deceit, that delivery could not be voluntary. The Court rejected PNS’s arguments and granted summary judgment in favor of the insurer, finding the language of the exclusion clear and unambiguous.