Diminution in Value of Stock of Jeweler is a Direct Physical Loss

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A Motion for Partial Summary Judgment filed by defendant Great American Insurance Company of New York (“Great American”) seeking dismissal of plaintiff’s claims of insurance coverage for consequential loss. In Nederland Jewelers LLC v. Great American, No. 2:21-CV-01431, USDC, W.D.  (January 11, 2022) the question was whether Rolex watches recovered from thieves lost value because they could not be sold as new Rolex watches.

FACTUAL BACKGROUND

An armed robbery occurred at the store on June 3, 2020, in which the four suspects smashed display cases and took several Rolex watches, among other items. They were caught and some jewelry was returned.

Great American moved for partial summary judgment on Nederland’s entitlement to coverage for consequential damages, asserting that such losses are not covered under the policy

APPLICATION OF LAW

Louisiana law provides that an insurance policy is a contract and that its provisions are construed using the general rules of contract interpretation in the Louisiana Civil Code. The words of the policy must be given their generally prevailing meaning and interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole.

A plain reading of “actual loss or damage” does not include “consequential loss” or “consequential damage.”

If the watches cannot be resold for close to their original value after these repairs, then it calls into question whether the repairs themselves offered the coverage contemplated by the policy. Accordingly, the court found that the exclusion cannot be read as barring all coverage for the watches’ decrease in value following repair.

ZALMA OPINION

The damage caused to the jewelry, whether left in the showcase smashed by thieves, changed the value and the ability of Nederland to sell the jewelry at the same price had they not been stolen and had not been damaged by the broken glass. Therefore, the court concluded, that there was direct physical loss and damage to the jewelry. The insurer could have paid the full value as required by the policy and taken the “damaged” watches and other jewelry as salvage or paid the diminished value. This case teaches that the insurer needed the assistance of an intelligent, well trained and experienced claims adjuster not a lawyer.

© 2022 – 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.

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