Wade Clark Mulcahy LLP

<p style="text-align: justify;">As background to this important win in <em><a href="https://www.wcmlaw.com/wp-content/uploads/2021/05/2020_04312_Crown_Jewels_Estate_Je_v_Crown_Jewels_Estate_Je_DECISION_AND_....pdf">Crown Jewels Estate Jewelry, Inc. d/b/a Stephen Russell v. The Underwriters at Interest at Lloyd's London </a></em> (a claim in which Crown sought indemnity for over $2 Million in stolen jewelry), I remind our readers of the wise admonition of the late Supreme Court Justice Scalia:  Never present to an Appellate Court the question to be decided as an actual question; that is, if framed correctly, the correct answer ought to be evident in the question.  And so, our Brief in <strong>Crown </strong>to the Appellate Division, First Department, framed the question in this fashion:</p>
<p style="text-align: center;"><strong>COUNTERSTATEMENT OF QUESTIONS PRESENTED</strong></p>
<p style="text-align: justify;">    The insurance contract here at issue bars coverage – using the disjunctive “or” – for theft on the part of any person to whom any insured property “may be delivered or entrusted by whomsoever for any purpose whatsoever.”  On agreed facts, the insured goods were delivered (handed over) to co-conspirators of the confessed thief. Analyzing controlling New York law and related precedent, the Trial Court (Honorable Barry Ostrager) ruled that no coverage existed for the theft of jewelry by a convicted felon, who created a fictitious presence on the internet as a Sony Music producer, because the insured property was, again on agreed facts, delivered by the insured to the thief’s co-conspirators.  Is there any reason to disturb this well-supported decision?</p>
Answer: No.  The ruling below must be affirmed.
<p style="text-align: justify;">The wording in this exclusion in some form or other appears in most Jeweler’s Block and Fine Art policies.  But relying on a California Appellate ruling, Crown contended that entrustments to an “imposter” created an exception to the Dishonest Entrustment exclusion.</p>
<p style="text-align: justify;">In an era of cybercrime, creating a false identity is child’s play for tech savvy thieves--and Sabatino, an alleged associate of the Gambino crime family, was a master con artist and a techno guru.  The Court’s ruling and the legal press described Sabatino’s skullduggery in great detail, and I urge you to read the colorful details of Sabatino’s exploits recounted in the Court’s decision.</p>
<p style="text-align: justify;">The key to the Court’s ruling was the recognition, embedded in settled New York jurisprudence, that the act of entrustment is to be determined by the state of mind of the insured rather than that of the imposter recipient.</p>
<p style="text-align: justify;">With phishing and like scams growing by the day, the above distinction reaffirmed by the Court, is a distinction that truly makes a difference.  We hope this precedent from the highly respected First Department, which is already getting <strong><a href="https://www.wcmlaw.com/wp-content/uploads/2021/05/Insurer-Freed-Of-2M-Jewelry-Loss-To-Mobsters-Fake-J.Lo-Vid-Law360.pdf">press coverage</a></strong> in the world of insurance, aids other insurers facing imposter or other deception claims.</p>
<p style="text-align: justify;">And that’s it for this <strong><em>This and That</em></strong>.  If you have any questions about this important ruling, please call or email <a href="mailto:denniswade@wcmlw.com">Dennis Wade</a>.</p>