A valuable possessions policy did not cover an insured’s financial loss resulting from the purchase of counterfeit wine, there being no loss to covered property. (Doyle v. Fireman’s Fund Ins. Co. (2018) 21 Cal.App.5th 33)
Facts
David Doyle is a collector of rare, vintage wine. Doyle insured his “world class” wine collection against loss or damage by purchasing a “Valuable Possessions” policy from Fireman’s Fund Insurance Company (Fireman’s Fund), with a blanket policy limit of $19 million. The policy’s “Perils Insured Against” provision stated that Fireman’s Fund was insuring against “direct and accidental loss … to covered property.”
During the years the Fireman’s Fund policy was in force, Doyle paid close to $18 million for purportedly rare, vintage wine from Rudy Kurniawan. However, law enforcement authorities later discovered that for many years Kurniawan had been filling empty wine bottles with his own wine blend and had been affixing counterfeit labels to the bottles. Kurniawan was convicted of fraud and was sentenced to a 10-year prison term.
Doyle made a claim to Fireman’s Fund for the losses Doyle had sustained due to Kurniawan’s fraud. Fireman’s Fund denied Doyle’s claim, asserting that there was no covered loss under the policy.
Doyle subsequently sued Fireman’s Fund for breach of contract and related causes of action. However, the trial court dismissed Doyle’s complaint on the ground that it failed to state a viable claim against Fireman’s Fund. Doyle appealed.
Holding
The Court of Appeal affirmed, reasoning that Doyle had not sustained any direct and accidental loss to covered property. The appellate court emphasized that nothing happened to the wine Doyle had purchased and insured. Rather, the wine was counterfeit (and essentially worthless) when purchased, and it remained counterfeit (and essentially worthless) throughout the entire coverage period of the policy. Although Doyle suffered a financial injury, the financial injury did not result from any loss to property that was covered by the policy. Thus, the Fireman’s Fund policy did not apply.
Comment
The policy in this case insured against “direct and accidental loss to covered property” as opposed to “direct and accidental physical loss to covered property.” However, the court held that while the policy did not use the word “physical,” the policy still required some loss to (i.e., some change in condition of) the property itself. Because that requirement was not met, the claim did not fall within the basic insuring agreement, and hence there was no need to consider exclusions.