CAR-JACKED JEWELRY NOT COVERED
Brian was driving his car when he heard a noise. He got out to inspect the vehicle, leaving it running with the keys in the ignition. As he was crouching behind the car and looking at the tail pipe a person got into the car and drove it away. While the car was later discovered, the two garment bags containing jewelry owned by Brian’s employer, E.M.M.I, were gone and never recovered. E.M.M.I filed a claim with Zurich, but the claim was denied because the theft was from an unattended vehicle.
Here is how the district and appellate courts ruled.
The facts of this case are not disputed. On February 17, 2000, a jewelry sales representative, Brian Callahan (Callahan), left his home with two “hard cloth garment bags” containing jewelry. Some of the jewelry was owned by E.M.M.I, Inc. (E.M.M.I.) a manufacturer and marketer of jewelry. The bags were in the trunk of his vehicle. Hearing noise from the rear of his vehicle, he stopped, exited the vehicle, and investigated the tail pipe while the vehicle remained running and with the keys in the ignition. He remained within two feet of the vehicle. An unknown person got into the vehicle and drove off leaving Callahan in the street. The vehicle was recovered and the jewelry was not.
E.M.M.I. was insured with a jewelers block policy issued by the Zurich American Insurance Company (Zurich). The policy was on an all risk basis for the jewelry; any loss or damage was covered, unless excluded. One exclusion provided that Zurich would “not pay for loss caused by or resulting from theft from any vehicle unless, you, an employee, or other person whose only duty is to attend to the vehicle are actually in or upon such vehicle at the time of the theft.” Callahan was specifically designated to carry E.M.M.I.’s jewelry.
E.M.M.I. filed a claim with Zurich and because E.M.M.I. could not show that Callahan was touching the vehicle at the time of the theft, the claim was denied. E.M.M.I. filed suit because Callahan had remained in close proximity to the vehicle during the theft. Zurich filed for summary judgment because Callahan was not in or upon the vehicle at the time of the theft. The trial court ruled in favor of Zurich and E.M.M.I. filed an appeal.
The appellate court upheld the decision noting that Callahan was crouched down behind the vehicle and inspecting the exhaust system and that “actually in or upon” does not mean close proximity.
E.M.M.I. Inc. v. Zurich American Ins. Co., No. S109609, Supreme Court of California, February 23, 2004
Insuring jewelry manufacturers can be very difficult because of the value of the inventory. The carriers interested in writing these risks understand the unique exposures and, therefore, often attach warranties that allow the carrier to deny coverage when the manufacturer or its employees are not vigilant.
If you are interested in writing a jewelry manufacturer, below is the Commercial Lines Risk Evaluation System Narrative that describes exposures and recommends coverages.
SIC CODE: 3911 Jewelry, Precious Metal
3915 Jewelers’ Material & Lapidary Work
3961 Costume Jewelry and Costume Novelties, Except Precious Metal
NAICS CODE: 339910 Jewelry and Silverware Manufacturing
Suggested ISO General Liability Code: 55802, 54012, 59923
Suggested Workers Compensation Code: 3383, 3385
Description of operations: Jewelry manufacturers produce items for personal adornment, including bracelets, brooches, earrings, necklaces, nose rings, other rings, and similar wares. Higher-value items may be made of gold, silver, or platinum, with or without precious or semiprecious stones. Costume jewelry materials include ordinary metals, bone, gemstones, glass, plastic, and wood. Metals can be cast into forms, crafted by hand, drawn as wire, electroplated, heat treated, pressed, cut from stock, or stamped. Due to the variety of materials used, prices of finished jewelry can run from a few dollars to hundreds of thousands of dollars each.
Property exposures consist of office, plant or shop and warehouse for raw materials and finished goods. Ignition sources can include electrical wiring, heating and cooling equipment, production machinery, and dust explosions. Metalworking hazards can include brazing, grinding, heat-treating, and welding. Plastic can catch on fire and explode, producing a heavy black smoke that impedes firefighting efforts. Flammable liquids may be used for finishing and polishing. These should be properly labeled and stored away from combustibles. Due to the theft limitations on jewelry in standard property policies, most manufacturers should purchase jewelers block policies to obtain adequate limits. As fires are often used to cover up a theft, controlling the theft exposure also reduces the exposure to fire. Appropriate security controls should be taken including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.
Equipment breakdown exposures include malfunctioning production equipment, dust collection and ventilation systems, electrical control panels and other apparatus. Breakdown and loss of use of the production machinery could result in a significant loss, both direct and indirect, especially, time element.
Crime exposure from employee dishonesty and theft is very high if the manufacturer works with precious or semiprecious metals or gemstones due to their high street value. Employees may act alone or in collusion with outsiders in stealing money, raw materials, or finished stock. Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements.
Inland marine exposure includes accounts receivable if the manufacturer offers credit, bailees customers, computers (which may include computer-run production equipment), exhibitions, goods in transit, jewelers block, and valuable papers and records for customers’ and suppliers’ information. While the primary hazard is theft, the items are also susceptible to other causes of loss, including breakage and transit exposures. There is a significant bailee exposure for sizing, cleaning, engraving, and repairing items for customers. Safes or vaults should be burglar- and fire-resistant.
Premises liability exposure is normally low as access by visitors is limited. If the manufacturer has a showroom or offers tours, visitors may be injured by slips, trips, or falls. Fumes, dust, and noise from metalwork or gem polishing could pose a nuisance hazard to neighbors. Off-premises retail locations or showrooms may be used to meet with customers.
Products liability exposure is generally low. Some metals produce allergic reactions when worn. Labeling of components as nonallergenic or hypoallergenic should be supported by quality control. If children’s jewelry is made, lead paint and cadmium are a particular concern, as well as choking hazards from small components such as beads.
Environmental impairment exposure can be moderate to high depending on the materials and processes used and the types of waste that are produced. Plastics and fiberglass may be toxic and are flammable, the catalysts may be caustic, and the final product is usually not biodegradable. Contaminants from chemicals, paints, and solvents used in metalworking processes can pollute the air, surface or ground water, or soil. Disposal procedures must adhere to all EPA and other regulatory standards.
Automobile exposure may be high if the manufacturer transports raw materials or finished products. Manufacturers generally have private passenger fleets used by sales representatives. There should be written procedures regarding the private use of these vehicles by others. Each driver should have an appropriate license and an acceptable MVR. All vehicles must be well maintained with documentation kept in a central location. Because of the high market value of jewelry, vehicles should be locked, fitted with alarms, and not left unattended once loaded or during transport.
Workers compensation exposure can be very high. Injuries from production machinery are common, as are burns, cuts, slips, trips, falls, and foreign objects in the eye, hearing loss from machinery noise, repetitive motion injuries, and back injuries from lifting. There should be safety training, protective equipment, and guarding of machines. Workstations should be ergonomically designed. Dust generated by metalwork or grinding of stones and gems requires respiratory protection devices, as well as eye protection and eye wash stations. Work with plastics, flammable liquids and chemicals can cause skin irritation, eye irritation, and possible long-term occupational disease. Drivers of forklifts and vehicles may be injured in accidents. Sales representatives carrying precious gems or metals may be injured or killed in holdups.
Minimum recommended coverage:
Building, Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Employee Dishonesty, Accounts Receivable, Bailees Customers, Computers, Exhibitions, Goods in Transit, Jewelers Block, Valuable Papers and Records, General Liability, Employee Benefits Liability, Environmental Impairment Liability, Umbrella Liability, Hired and Nonownership Auto Liability, Workers Compensation
Other coverages to consider:
Earthquake, Flood, Money and Securities, Cyberliability, Employment-related Practices Liability, Business Auto Liability and Physical Damage, Stop Gap Liability
Contacting the prospect
Have you decided to pursue a jewelry manufacturer? If so, offering to provide a risk management survey might open the door. You could use the Commercial Lines Risk Evaluation System Jewelry Manufacturer’s Questionnaire to conduct the survey, but first you must get the appointment.
Below is a Business Building Letter you could mail to your identified prospects.
If you try on a pair of shoes that don’t fit, you know about it promptly. If you buy insurance that doesn’t fit, you might not know it until it’s too late.
Our company has an extremely effective method of testing coverage by evaluating what kind of insurance, and how much, you should have. We are also able to identify coverage you may have that you don’t need. Our survey has earned high marks throughout [name of your city].
We urge you to take advantage of this no-obligation service. It is especially important now, with the many changes that have occurred in coverage and rates in recent years.
Please drop the enclosed business reply card in the mail today, give me a call at [phone number] or email me at [email address]. We’ll arrange a meeting convenient for you and provide the survey without cost or obligation.