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In vino no veritas

In vino no veritas

October 03
07:14 2018

In vino no veritas

David Doyle was a collector of rare vintage wine. His collection was housed in a wine storage facility in Laguna Beach, California. Starting in 2007, Doyle insured his collection against loss or damage by purchasing a “scheduled valuable possessions” policy from Fireman’s Fund Insurance Company with a blanket limit of $19 million. Doyle went on to purchase eight annual renewal policies.

During the eight years that Doyle was insured under the policy, he purchased close to $18 million of purportedly rare vintage wine from Rudy Kurniawan. A law enforcement investigation revealed that for many years Kurniawan apparently had been filling empty wine bottles with his own wine blend and had been affixing counterfeit labels to the bottles. In 2013, Kurniawan was convicted of fraud and was sent to prison for 10 years.

In 2014, Doyle filed a claim seeking reimbursement from Fireman’s Fund for the losses he sustained because of Kurniawan’s fraud. Fireman’s Fund denied the claim, stating there was no covered “loss” under the policy.

In 2015, Doyle filed a first amended complaint against Fireman’s Fund alleging breach of contract, among other causes of action. Fireman’s Fund filed a demurrer, which the court sustained without leave to amend. Doyle appealed.

On appeal, Doyle argued that the policy provided “broad protection against all insurable risks, which include crime-related losses to [his] investment whether anything physical happened to the wine or not.” Fireman’s Fund argued that no “loss or damage to covered property” occurred; that is, “the wine is in the exact same condition now that it was in when [Doyle] first insured it.”

The “PERILS INSURED AGAINST” provision of the policy provided: “We insure for direct and accidental loss or damage to covered property caused by an ‘occurrence.’” The policy defined an “occurrence” as “a loss to covered property which occurs during the policy period … and is caused by one or more perils we insure against.” The policy did not define the term “loss.”

The “EXCLUSIONS—LOSS NOT INSURED” portion of the policy listed exclusions such as “Wear and tear, gradual deterioration, latent defect or inherent vice[.]” The policy also provided that: “If wine is covered …, the following exclusions also apply: a. Failure to use reasonable care to maintain all heating, cooling or humidity control equipment in proper operating condition …; b. Improper handling or storage; c. Consumption; or d. Normal shortage, leakage, spillage, evaporation, dissipation, spoilage or deterioration, all usual and customary to wine.”

According to the court, the plain language of the “PERILS INSURED AGAINST” provision made it clear that Fireman’s Fund was insuring against “direct and accidental loss … to covered property[.]” Fireman’s Fund was insuring against any losses to the wine; it was not insuring against any losses to Doyle’s finances or to his unrealized expectations as to the value of the wine he had purchased.

Based on the nature of property insurance and the plain language of the policy, the court agreed with Fireman’s Fund; Doyle indeed suffered a financial loss, but there was no loss to his covered property.

Doyle vs. Fireman’s Fund Insurance Company-California Court of Appeal, Fourth District, Division 3-March 7, 2018-G054197.


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