A Video About The Jewelers Block Conditions

Read the full article at https://www.linkedin.com/pulse/jewelers-block-policy-barry-zalma-esq-cfe and see the full video at https://rumble.com/vq4biu-a-video-about-the-jewelers-block-conditions.html?mref=22lbp&mrefc=2 and at https://youtu.be/8RgV83YHMqM and at https://zalma.com/blog plus more than 4000 posts.

Inadequate Books

The jewelers block policy is an inland marine policy that covers against the risk of loss of highly valuable movables, jewelry, gold and gemstones. Since most gemstones and valuable metals are fungibles – there is no way to identify one diamond from another without a laser engraved serial number, theft and fraud is fairly easy. As a general condition a jeweler’s block policy will contain, as a material condition precedent and subsequent, an “iron safe clause” that requires the insured to maintain records sufficient to establish the exact amount of loss.

The records clause is often referred to as the “iron safe” clause because the original version of the clause required that the records be kept in a “fire proof iron safe.”

Commonly, jewelers maintain a perpetual inventory on index cards, in loose leaf books, in ledger books or on computer data base software and then take a physical inventory annually to reconcile the perpetual inventory. Problems generally arise when the perpetual inventory is not reconciled on a regular schedule and the jeweler fails to reconcile errors in recording purchases or sales, expected shrinkage or undiscovered thefts.

When an insured fails to reconcile the perpetual inventory regularly, errors in entry and shoplifting losses will continue to be carried on the books of the insured as if the gemstones still exist in the inventory although they were sold or were stolen. The insured will inadvertently present an inflated loss to the insurer or will be carrying an inflated inventory on his books. At the time of loss, it will be impossible to determine exactly what was taken since the records are unreliable.

Mysterious Disappearance

A New York court found that a claim is outside the ambit of coverage on the basis of the policies’ exclusionary clause for “unexplained loss, mysterious disappearance or loss or shortage disclosed on taking inventory.” 

Lack of Protective Safeguards

ZALMA OPINION

The reason Jewelers Block policies have many warranties and conditions precedent is the fact that they present a very high risk of a major loss by robbery or burglary and a serious exposure to fraud by an insured who is willing to manipulate the business records. See the story “The Great Jewel Robbery” in my book, the Insurance Fraud Costs Everyone.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.