I recently had the extraordinary opportunity to join other seasoned insurance professionals in a panel presentation focused on claims arising under jeweler’s block insurance. We gave this presentation as part of the annual gathering of the International Fine Art and Specie Insurance Conference (“IFASIC”) held this year on the Mediterranean island nation of Malta(*). This blog shares a few reflections about that presentation.
For those unfamiliar with the term, “jeweler’s block” insurance is a specialized insurance utilized to insure raw gems and finished jewelry in a jeweler’s possession against theft, loss and other specified risks. These insurance policies, issued largely by the London market, are unusual in several respects:
- Before issuance of the policy, the insurer typically conducts a survey of the jeweler’s business to assess the adequacy of staffing, security measures, inventory processes and other operations.
- The insurer then typically includes very detailed and customized policy conditions specifying security and operations measures that the policyholder must follow.
- The coverage extends to gems and jewels in the jeweler’s possession, even if not owned by the jeweler; thus jewelry owned by customers or owned by others and consigned to the jeweler for sale are all covered. (In the event of a claim, this can cause difficult conflicts for a policyholder who is simultaneously trying to enforce coverage rights while needing to preserve key business relationships.)
- If a loss occurs, the policyholder is obligated to provide heightened cooperation to the insurer’s investigation, including the giving of sworn testimony under oath.
A first reflection on attending a conference of “insurance industry insiders” is that the attendees viewed me—a “California-based policyholder counsel”—as something as unusual as a just-discovered species from an exotic land. Although many of the knowledgeable industry attendees had experience with claims litigated or negotiated on behalf of policyholders, they lacked understanding of the analysis and strategies that Nossaman attorneys routinely pursue on behalf of policyholders—when and why we cooperate with insurers at times, which insurer tactics we need to resist at all costs, and how we size up the pluses and minuses of settling a claim.
Next, I learned from the mostly European attendees that insurance claims proceed much differently over there—fraudulent and borderline claims are far less common, policyholders rarely retain counsel to assist with claims, litigation is rare and there are knotty cross-jurisdictional issues arising from differing legal systems.
The Europeans were somewhat mystified by the whole idea of “insurance bad faith” as it has long existed under California law. They found it surprising that insurers—but not policyholders—can be held liable for punitive damages when they wrongfully deny coverage or employ improper tactics during the investigation or negotiation of a disputed claim.