Simplexdiam, Inc. v. Brockbank

Simplexdiam, Inc. v. Brockbank

Opinion

 [*35]   [**65]  Sullivan, P. J.

This is an appeal by an excess insurer affording $ 3.5 million of additional coverage, "excess of $ 500,000 each and every loss," under a conventional all risks jewelers block insurance policy, from the denial of its motion for summary judgment dismissing the complaint for failure to show a loss in excess of the $ 500,000 threshold necessary to trigger its obligation to pay. The alleged insurable loss, calculated at $ 1,687,779, is based on an inventory loss that took place over a nine-month period.

 [***2]  Plaintiff Simplexdiam, Inc. (Simplex), a Manhattan-based wholesale jeweler specializing in diamond rings, pendants, bracelets and chains, was insured under a Lloyd's policy providing an initial $ 500,000 layer of primary coverage, subject to a $ 25,000 deductible "each and every loss," underwritten by 12 syndicates, and a further $ 3.5 million layer of coverage, "excess of $ 500,000 each and every loss" for losses occurring during the policy term, underwritten by 12 syndicates, many of which also participated in the primary layer. The policy provided coverage against "all risks of loss or damage to the [insured] property arising [from] any cause whatsoever," subject to certain exceptions not relevant here.

Although a policy condition (Clause 5 [Condition M]) excepts from coverage "[u]nexplained loss, mysterious disappearance or loss or damage or shortage disclosed on taking inventory," that condition was deleted and replaced, at Simplex's request, by an endorsement entitled "Clause 5 (Conditions) M," which provided a much narrower exception. It read, "No claim shall attach for goods missing at stock-taking in respect of which no claim has been previously notified unless [***3]  the loss be proved by the Assured to be due to a peril covered by the policy."

The facts underlying this lawsuit are as follows. Simplex conducted its last fully reconciled inventory before the loss in question in September 1995. In December 1995 and January 1996, it began to notice that certain items were missing. A "rough inventory" conducted in late January 1996 but never completed was necessarily inconclusive. Toward the end of February 1996, Simplex's president, although believing that the problem was a logistical one, involving perhaps a breakdown in the company's internal inventory procedures and one  [*36]  not likely to lead to an insurance claim, informed Simplex's long-time insurance broker of his concerns. When it became apparent in mid-March that the missing inventory still could not be explained, Simplex's broker, on March 15 and again on April 3, 1996, notified a representative of the insurers of the problem and the potential for a claim. The insurers thereafter arranged for the appointment of an adjuster to investigate the matter.

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