A ruling in a California appeals court should send collectors scurrying to inspect their insurance policies.
In 2007 David Doyle, a collector of rare wine, began insuring his collection against loss or damage. He purchased a “Valuable Possessions” policy from Fireman’s Fund Insurance Company, with a blanket policy limit of $19 million. He renewed the policy eight times.
During the years that Doyle was insured under the policy, he purchased almost $18 million of wine from Rudy Kurniawan, who was later accused of filling empty bottles with his own wine blend and affixing counterfeit labels. In 2013 Kurniawan was convicted of fraud and was sent to prison for ten 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 all coverage, stating that there was no covered “loss” under the policy.
In 2015 Doyle filed a lawsuit alleging breach of contract, among other causes of action. Fireman’s Fund filed for dismissal, which was granted. Doyle appealed.
The appeals court, in a ruling dated March 7, sided with Fireman’s Fund. “Doyle indeed suffered a financial loss, but there was no loss to his covered property,” the opinion reads.
The ruling stated that “The ‘perils insured against’ provision of the Firearm’s [sic] Fund insurance policy Doyle purchased provides: ‘We insure for direct and accidental loss or damage to covered property....
“Doyle argues that the policy provides ‘broad protection against all insurable risks, which include crime-related losses to [his] investment whether anything physical happened to the wine or not.’
“Conversely, Firearm’s [sic] Fund argues 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 court ruled that Fireman’s Fund was insuring against “direct and accidental loss...to covered property.” It was insuring “against any losses to the wine; Fireman’s Fund 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.”
“When Doyle purchased the wine from Kurniawan it was counterfeit. The wine remained counterfeit (and essentially worthless) throughout the entire coverage period of the policy. Perhaps Doyle has a valid claim against Kurniawan for fraud. However, Doyle cannot reasonably expect his Fireman’s Fund ‘Valuable Possessions’ property insurance policy to reimburse him for his multiple purchases of wine from Kurniawan, which was essentially valueless at the time of purchase.”
“Doyle suffered a diminution in value—he lost the money he had invested in his wine collection—because of the fraud committed by Kurniawan. But Doyle’s financial loss was not a covered peril, it is simply a measure of his damages,” the judges wrote.
Further, the judges wrote that “the policy Doyle purchased only insured him against potential harms to the wine itself, such as fire, theft, or abnormal spoilage; Doyle did not insure himself against any potential financial losses. Doyle did not buy a provenance insurance policy; Doyle bought a property insurance policy.”
Originally published in the May 2018 issue of Maine Antique Digest. © 2018 Maine Antique Digest