Academic journal article Journal of Risk and Insurance

California Supreme Court Refuses to Give Literal Effect to Jewelers' Block Policy Language Limiting Coverage

Academic journal article Journal of Risk and Insurance

California Supreme Court Refuses to Give Literal Effect to Jewelers' Block Policy Language Limiting Coverage

Article excerpt

E.M.M.I., Inc. v. Zurich American Ins. Co., 84 P. 3d 38, 9 Cal. Reptr. 3d 701 (California Supreme Court--February 23, 2004)

Perhaps because of the high risk of moral hazard or outright fraud through "inside jobs" and because of the often suspicious-looking circumstances of jewelry losses (e.g., a courier stops to tie a shoe and the bag of gems is gone when he looks up), insurers have won a good deal of cases by persuading courts to take a fairly literal view of the requirement found in most jewelers' block policies that requires a gem courier to be "in or upon the vehicle" at the time of any theft from the vehicle. Many courts read the language literally to insist on the courier's physical contact with the vehicle if there is to be coverage for jewelry stolen from the courier while transporting the gems by car. However, the California Supreme Court held in E.M.M.I., Inc. v. Zurich American Ins. Co., 84 P. 3d 385, 9 Cal. Rptr. 3d 701 (Cal. 2004), that the word "upon" is sufficiently ambiguous that it must be construed in light of the policyholder's reasonable understanding of the scope of coverage to include thefts that take place when the insured person is in close proximity to the vehicle and attending it. See 84 P. 3d at 397-98. See also 84 P. 3d at 388-96 (reviewing axioms of contract construction and prior case law). See also Annot, Construction and Effects of "Jeweler's Block" Policies on Provisions Contained Therein, 22 A.L.R. 5th 579 (1994); Couch on Insurance [section]1:57. Two Justices dissented. See 84 P. 3d at 398 (Kennard, J., joined by Brown, J., dissenting).

E.M.M.I. v. Zurich is a big win for jewelers' block policyholders in the supreme court of the largest state concerning an issue that arises with some frequency. Many jewelers block policies contain arbitration provisions, shrinking the number of reported cases, which will make gauging the impact of the decision more difficult. But the case will certainly be used by policyholders before other courts and arbitrators, many of whom are likely to agree with the majority's analysis. Although the position of the E.M.M.I. v. Zurich dissenters and insurers has linguistic support (to be "upon" a tangible object usually means in physical contact with the object), the E.M.M.I. v. Zurich majority approach makes more sense in terms of rational application of the purpose of the insurance policy.

The reason this language is in a jewelers' block policy is to attempt to ensure that valuable jewels are not left just sitting around without a human guard, even in a locked car or trunk. …

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