The First Department recently affirmed a lower court decision limiting the application of a personal conveyance clause exclusion in a Jewelers Block insurance policy. In Ilico Jewelry Inc v Hanover Ins Group, 2014 WL 4185220 (N.Y.Sup. 2014) the insured jeweler, Mr. Ilian, travelled to Aruba to meet with customers and inform them of his new line of jewelry. While in Aruba, Mr. Ilian kept all of is jewelry in a backpack.
One night Mr. Ilian met up his cousin Allen, and he brought his backpack along for the evening. While dining at a restaurant, Mr. Ilian had to use the facilities, and he asked his cousin to watch the backpack. As luck would have it, two women approached the table and stole the backpack right from under Allen’s nose. Although the police were able to recover the backpack, over $200,000 in jewelry was missing. Mr. Ilian then brought a declaratory judgment action against Hanover to provide coverage for the stolen jewelry.
Normally, such a situation would fall under the personal conveyance clause in a Jeweler’s Block policy. The personal conveyance clause in Mr. Ilian’s policy excluded coverage for insured goods while in transit unless the goods were in the close personal custody and under the direct control of Mr. Ilian or “left for safekeeping with a jeweler in the trade.” Fortuitously for Mr. Ilian, his cousin happened to be a jeweler.
Hanover argued that Allen was not acting as a jeweler in the trade when he was given the backpack at the restaurant, and simply asking Allen to watch the backpack does not constitute safekeeping. Specifically, Hanover argued that Allen was not aware of the level of care that should have been taken to make sure the backpack was secure, and therefore he was not a jeweler in the trade. Mr. Ilian argued that the loss falls within the exception to the exclusion because Allen is a jeweler, and it does not matter whether Allen was working in his capacity as a jeweler at the time of the theft.
The court agreed with Mr. Ilian, and found that Hanover did not establish as a matter of law that the phrase “jeweler in the trade” only applies to jewelers working as jewelers at the time of a loss. On appeal, the First Department affirmed and stated that “[q]uestions of fact exist as to the meaning of all the terms contained within the ‘Personal Conveyance Clause’ exclusion that must be resolved by a trier of fact.” Ilico Jewelry Inc v Hanover Ins Co, 2016 WL 71753 (1st Dep’t. 2016).
This case presents an example of issues that arise when undefined terms in an endorsement adversely affect the insurer. The interpretation of terms “safekeeping” and “in the trade” are now up to an uncertain finder of fact. Hanover never intended to cover such a situation; the insurer sought only to provide coverage in cases where another jeweler knows the value of the goods, and takes the appropriate measures to ensure their safety. However, from the facts of this case it is clear that neither Mr. Ilian, nor Allen took such appropriate measures.
Nevertheless, the decisions by the lower and appellate courts rely heavily on the happenstance that Allen was a jeweler by occupation. Family-run jewelry businesses are common, and an insurer may be exposed to insuring a risk that it did not intend to cover. To limit such exposure, insurers may want to specify that a loss or damage to property is only covered when left in the safekeeping of a jeweler working in the trade. Thanks to Dan Beatty for his contribution to this post. Please email Brian Gibbons with any question.