Jeweler Recovers For Off-Premises Robbery

Kobico, Inc., was a wholesale jeweler with its business located in the Jewelers' Exchange Building in downtown Boston. In August 1992, Kobico purchased a jewelers block policy from various underwriters of Lloyd's of London, which covered inventory, including jewels and other stock located both on and off the premises. When applying for the policy, Jacob Kuperberg, Kobico's president, made certain representations concerning record-keeping methods and inventory. Five months after the policy issuance, Kuperberg was robbed at gunpoint of over $150,000 in jewels off the premise of the business.

Lloyd's denied coverage and rescinded the policy because of alleged misrepresentations in the application about how often inventory was taken off-premise, how much inventory consisted of stock and jewels taken on consignment, and the inventory value kept on its premises.

The insured filed suit, and the jury in the court below found that, while the misrepresentations in the application were material, there was no actual intent to deceive nor increase the risk of loss to Lloyd's. An appeal was filed by Lloyd's.

The issue before the court on appeal was whether the answers in the application were warranties, which barred recovery only if there was an actual intent to deceive, or there were conditions precedent that would preclude recovery.

The form used to apply for the coverage stated that the representations made therein by the applicant would be treated as warranties upon issuance of the policy. The higher court agreed with the trial court's finding that the statements in the application were not conditions precedent to recovery and that the questions of the insured's actual intent to deceive and increase the risk of loss were properly submitted to the jury.

Furthermore, the trial court's admission into evidence of building security was relevant even though the loss occurred off the premises. The higher court said the evidence was relevant since the jury could find that the risk of loss would not be increased simply because the insured understated the value of the inventory kept on the premises.

The judgment entered in the lower court in favor of the insured was affirmed.

Kobico, Inc., v. Grahame F. Pipe et al. (Lloyd's of London)--No. 96-P-842--Appeals Court of Massachusetts, Suffolk--December 30, 1997--688 North Eastern Reporter 2d 1004.