WCM Partners to Speak at IFASIC Conference

Dennis Wade and Michael Bono will be presenters at the International Fine Art and Specie Conference in Athens, Greece, on Thursday, October 20, 2016.

“Guilt, Innocence, and Coverage Under Jewelers Block Policies” will deal with issues such as the rights of innocent stakeholders during a fraudulent claim, the impact of policy rescission, and the interpretation of specialized JB exclusions.

If you are not attending the conference but are interested in learning more about this subject, please write to Dennis or Mike.

Jewelry Theft May Be Covered While In Transit Due To Ambiguous Personal Conveyance Clause (NY)

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.

New York Applies Wide Definition of “In Transit:” Transit Insurance Covers Cash Stolen from Vault.

In CashZone Check Cashing Corp. et al. v. Vigilant Insurance Co. et al., Index Number 653245/11 the Appellate Division, First Department, reversed the trial court’s determination that cash that was stolen from the vault of an armored car service company was not “in transit” pursuant to the terms of the insurance contract. The facts of the case are as follows.

Plaintiff CashZone hired Mount Vernon Money Center, an armored car company, to transport currency from the Federal Reserve Bank of New York. Mount Vernon would pick up the money from the Fed and then take the money to its vault where it would be processed for delivery to CashZone locations. While at the facility, Mount Vernon’s principals embezzled $470,000 as part of a fraudulent scheme. Mount Vernon’s principals were indicted of bank fraud and pleaded guilty.

CashZone filed a claim with Vigilant under its insurance policy’s “in transit” provision. Vigilant denied coverage for the loss, claiming that the money was not “in transit” but rather was within Mount Vernon’s vault. The trial court agreed with Vigilant, finding that the stop at Mount Vernon’s vault was not an “incidental” stop but a substantive interruption of the transit process.

The First Department reversed, noting that New York courts apply a broad definition of the term “in transit” and refused to accept the cases cited by Vigilant from other jurisdictions.
The court ruled that the entire time Mount Vernon possessed the cash was “one continuous shipment process,” and that the stop at the vault “was expressly understood by all concerned as a necessary component of the act of delivery of cash by armored car from the Federal Reserve Bank to plaintiffs’ locations.” The court reasoned that as long as the cash remained in the possession of the armored car service making the delivery, and the stop at issue was in service to that delivery, the property was in transit until the downstream delivery was completed.
The court also rejected the Vigilant’s argument that the endorsement covered only thefts by a third party from the transportation company, and did not cover theft by the transportation company itself, finding that the endorsement provided for no such distinction.

CashZone shows that New York jurisprudence focuses on the purpose of a contract — not the process by which it is achieved. Specifically, the case stands for the proposition that “storage” — if incidental to the object of transport — will be covered by a transit endorsement. WCM believes that CashZone should be read in a larger context. By analogy, its logic reaches past armored car risks to other shipping contracts such as fine art and storage agreements.

If you have any questions about this case please contact Dennis Wade at dwade@wcmlaw.com.

The Cannes Jewelry Heist: A Narrative.

Lost amidst the summer holidays was detailed narrative reporting on this past July’s $136,000,000 diamond and jewelry theft at the Intercontinental Carlton Hotel in Cannes, France. In the robbery, a thief hidden by a bandana and motorcycle helmet and armed with a gun managed to take the Leview diamonds and other stones and jewelry and disappear.

In this interesting article from The Atlantic, the details of the robbery, its potential causes and the likely culprits (perhaps the Pink Panthers (on whom we have previously reported) are discussed.

One thing is certain – given the size of the insurance claim being presented to the London market, there will no doubt be much discussion on the adequacy of the pre-show surveys and whether the Policy’s warranties were heeded.

For more information about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.

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