Insurance Advocate
Volume 100, No. 48
December 9, 1989

Insurer Pays $1.2 Million For Jewelers Block Burglary Loss Before Trial Ends

An insurance Company decided to pay the full amount of a burglary claim under a Jewelers Block policy when the trial of the issue coverage was into its fourth day in U.S. District Court for the Eastern District of New York. A representative of the insurer, the St. Paul Fire & Marine, on November 5, gave a check fo5 $1.2 Million, the amount being sought to close the case. There had been an earlier opportunity to settle the case at a lesser payout.

The suit was brought by Jewelers of Bond Street and Tabor Sanford, Inc., of Great Neck, N.Y. The jewelry firms, in business for 36 years in the same community, never had a burglary loss prior to the one on July 28, 1985, which resulted in the lawsuit.

Failure alleged

In denying liability for the burglary loss, the St. Paul alleged failure on the part of the insured jewelers to cooperate in the investigation of the claim, which, counsel for the plaintiff said in the trial memorandum of law, was never asserted until the suit was filed. The St. Paul also denied liability asserting that there was a breach of the covenant on the production of books and records, and breach of warranty with respect to the alarm system. The plaintiff denied all of the affirmative defenses as being devoid of merit.

July 28, 1985, was a Sunday, and the store's alarm was triggered. ADT, the central office alarm company received the signal and called Tabor Sanford, asking him to meet their agent at the store. Garry Sanford, the son, and the ADT agent entered the store and after a careful search found nothing disturbed. According to a reconstruction of the incident, they were not aware that the alarm had been set off because of cut telephone lines. They closed the store, unaware that the alarm was no longer operating.

Reconstruction of the event also showed that the thieves, described as highly professional, were on the scene and that when the coast was clear they proceeded to use drills to get through the Diebold door and locks. The store was "wiped out", according to the evidence presented in the suit. The loss was discovered the next morning when the owners came to open.

In its defense on breach of warranty on the alarm, the St. Paul had argued that it was a breach because the policy required the alarm to be in working order when the store was shut.

An unusual aspect of the lawsuit was that while it was a first for the storeowners; they had an ongoing adversarial relationship with their insurer. The jewelry storeowners were engaged in a lawsuit against their insurance broker, Blemencranz, Klepper & Wilkins, because of an alleged failure on the part of the brokers to provide them with fidelity coverage.

Weg & Myers, the New York law firm representing JBS on the burglary claim, also represent the jewelers in the E & O suit against the broker and the St. Paul is the E & O insurer. In plaintiffs' trial memorandum of law, the assertion was mad3 that "it became evident once the (burglary) claim was made that the St. Paul did not distinguish between its two roles.

Another aspect of the litigation is that one Lawrence Gilberti was assigned by St. Paul to oversee the burglary claim; he had also been the adjuster assigned to the E & O claim. Gilberti apparently recognizing the conflict when he reached the store following the report of the burglary phoned Weg & Myers to inform them about the incident. Subsequently, Gilberti was relieved of his assignment on the burglary case.

Dispute also arose over the insured's compliance with the company's demand for books and records, but Weg & Myers offered evidence that the company on several occasions had acknowledged the cooperation of the insureds on such demands, producing "thousands of documents". It was when the company sought records, which had already been produced, Weg & Myers said that there was a realization that this was a "constructive denial of the claim". The suit followed.