Jewelers Block Policy

JEWELERS BLOCK POLICY

(December 2016)

 

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INTRODUCTION

Insurance companies that provide jewelers block coverage can use Insurance Services Office (ISO) or the American Association of Insurance Services (AAIS) developed forms or decide to develop their own coverage form. This analysis reviews coverage that such an independently developed form may provide. Such coverage may be written on retail and wholesale jewelers, jewelry manufacturers, pawnbrokers, watch dealers, local or regional jewelry stores, and jewelry departments in department and specialty stores. Modified coverage may be used to insure bench or repair jewelers, appraisers, and custom designers.

POLICY CONSTRUCTION

The independent non-filed Jewelers Block Policy requires at least the following forms:

DECLARATIONS

The independent non-filed Jewelers Block Policy Declarations usually includes the following information but is not necessarily limited to it:

Termination Statement

The coverage this policy provides does not take effect until the coverage it replaces is terminated. This applies only when there is prior coverage.

Insuring Agreement

Coverage applies in consideration of the premium charged and the Proposal for Jewelers Block Policy that is attached to the policy and made part of it. The dates on the proposal must match the policy period dates. The named insured and the insurance company agree that the proposal is the basis for the policy and that the insured warrants that each and every statement in it is true.

Note: Warranties in inland marine insurance are usually more enforceable than warranties in other lines of insurance. Because the proposal is attached to the policy, the policy can be voided if any statement on the proposal is false, untrue, or incorrect.

Limits of Liability

The most the insurance company pays for any loss, disaster, or casualty is limited to amounts entered for each of the following:

a. Property at the insured's premises

Related Court Case: "Premises" Construed As Entire Building When Not Otherwise Restricted

b. Property that is off premises and:

Note: Property the insured deposits with such dealers or individuals for safekeeping, an employee, or a member of the business while traveling is subject to the limit in d. below.

c. Shipments that are in transit by customer parcel delivery service and parcel delivery services that railroads, waterborne carriers, air carriers, and passenger bus lines offer.

Note: This is subject to Condition e. under Insuring Conditions.

d. Property that is elsewhere and not included in the limits above or that may be otherwise limited

e. Money that is in locked safes or vaults

f. Patterns, molds, models, dies, and similar property

g. Furniture, fixtures, tools, machinery, and fittings

h. Tenant's improvements and betterments

i. Total policy amount as the total of the limits above represents

There is a statement that the insurance company issues the policy and the insured accepts it subject to the policy provisions and requirements along with other provisions and requirements that may be endorsed to the policy. A space is also available to list the forms and endorsements that are part of the policy when it is issued.


JEWELERS BLOCK POLICY ANALYSIS

Property Insured

1. Covered Property

The insurance company covers the following property:

a. Jewels, jewelry, precious and semi-precious stones, pearls, watches, watch movements, gold, silver, platinum, other precious metals and alloys, and other stock the insured owns and uses to conduct its business

b. Property that is described in a. above after it has been delivered or entrusted to the insured. This applies only when the property belongs to others that are not in the jewelry business or engaged in the jewelry trade.

c. Property that is described in a. above after it has been delivered or entrusted to the insured. This applies only when the property belongs to others that are dealers in such property or that are engaged in the jewelry trade. However, this coverage is limited to the extent of the named insured’s actual interest in such property because of money advanced on it or to its legal liability for loss or damage to it.

Note: Property this policy covers is significantly different from property that most other commercial property coverage forms and policies cover. Those other policies exclude such property for theft coverage or offer only limited coverage, small limits, or restricted extensions of coverage. Jewelry businesses may choose to use this policy to provide all property coverages or insure only the jewelry related items under this policy.

Example: Peter's Pearls and Precious Stones is much more than just a large retail jewelry store. It also has a dedicated jewelry manufacturing operation on the same premises in addition to repairing and remodeling property of others in the jewelry trade and individuals not in the business. Peter insures the value of the stock in trade of his business under this policy as well as the property of others in its possession. He insures the value of his furniture, fixtures, office supplies, machinery, tools, fittings, patterns, dies, molds, and models under another policy.

 

2. Coverage Territory

Coverage applies to the property described above while it is within and in transit between states of the United States of America, the District of Columbia, and Canada. This is subject to any limitations, conditions, exclusions, or exceptions stated in the policy.

Note: This policy does not have a "Property Not Covered" section that is common in most other property coverage forms and policies. This is because the property that is covered is so narrowly defined.

INSURING CONDITIONS

This policy insures against all risks of loss or damage to the property described above that arises out of any cause whatsoever except as follows.

a. Theft, Conversion, or Dishonest Acts

There is no coverage for loss, damage or expense incurred because of theft, conversion, or other dishonest acts or omissions committed by any of the following:

The loss is excluded whether occurring during or after normal business hours.

However, such excluded loss or occurrences under any of the following circumstances, coverage does apply. The following are exceptions to this exclusion:  

 

Example: Peter's Pearls and Precious Stones include some loose diamonds in a larger package of other property it sends to a bench jeweler via common carrier. Peter does this to throw off thieves within the common carrier he suspects may be planning a heist. Peter declares the higher value to the carrier but the entire package is stolen at a truck stop while the driver eats lunch. This loss is excluded because coverage applies to only property with a motor carrier that operates as a parcel delivery service.

 

 

Example: Sara got on the train in Maysville and was so thankful when a porter assisted her with her luggage that included her sample case. He placed the items in the overhead bin and left her to relax. At the end of the journey she looked for the helpful porter to return but, when he didn’t, she gathered her items but discovered that the sample case had disappeared. She notified the conductor and he informed her that there had not been a porter service available at her departing station. Because the imposter had been providing porter services, coverage would be available for the stolen sample case.

 


 

 

b. Consequential and Other Losses

There is no coverage for loss or damage caused by or that results from the following:

 

Example: Peter's Pearls and Precious Stones manufacturing operation neglects to compensate for a minor flaw in a valuable diamond it is cutting down to fit into a solitaire ring and matching earrings. The diamond breaks into unusable, worthless shards when the artisan strikes it with his hammer. The loss of the diamond's value is excluded.

 

c. War, Nuclear, and Governmental Actions

Coverage does not apply to loss or damage caused by or that results from:

d. Earthquake and Flood

Loss or damage due to earthquake or flood at the insured’s premises is not covered. The term earthquake is not modified so other types of earth movement could be covered. Flood is more defined and includes surface waters, waves, tides, tidal wave, tidal water, overflow of streams or other bodies of water. Spray from any of these is also not covered regardless of the wind driving it. The exception is that any ensuing fire damage is covered provided fire is covered under the policy.

Note: This exclusion applies only to property at the insured's premises. Property in transit is covered.

e. In Transit

There is no coverage for loss or damage that occurs during transit to shipments by mail unless it is first class and registered or it is express. Shipments by rail, water, or air carrier are also not covered unless being handled as parcel transportation or baggage services.

Note: Accompanied baggage is property in the custody of air carriers' passenger baggage services transported under an air tariff to be delivered to the passenger at his or her destination. As a result, it is subject to the limitation for Property Elsewhere.

Coverage also does not apply to loss or damage that occurs during transit to shipments by motor carriers or truckers other than those under receipt of armored car services, parcel transportation, or baggage services of passenger bus lines. This exception also applies to such services that operate exclusively as a customer parcel delivery service, including their air divisions according to their tariff.

Note: In transportation insurance, a tariff is a schedule of the carrier's prices or fees.

f. Breakage

There is no coverage when fragile or brittle articles break. The exceptions are when the breaking is part of a loss caused by fire, lightning, explosion, aircraft, vehicles, flood, earthquake, windstorm, strikers, rioters, persons engaged in civil commotion or labor disturbances, burglars, thieves, or accidents to conveyances used to carry the covered property. Coverage is limited to the coverage provided under those causes of loss.

Note: Breakage losses are often called "maintenance losses." This is because they are usually inevitable and are most appropriately handled as non-insured costs of doing business.

g. Installment Sales Property

Loss or damage to merchandise that has been sold under an installment or deferred payment plan and that merchandise is no longer in the insured's custody is excluded.

 

Example: Jake sold a necklace to a valued customer under a three-year installment plan. Six months later a fire occurs at the customer’s home. All of the jewelry in the house disappears. The customer refuses to pay more on the necklace and Jake has no coverage for the loss.

 

h. Property Being Worn

There is no coverage for loss or damage to property while it is being worn by the insured, its corporate officers, members of the business, or the insured's directors, employees, agents, servants, or messengers. This exclusion also applies to property worn by any dealer or other person, business, or corporation in the jewelry business, or by any of their officers, directors, employees, agents, servants, or messengers or their family members, relatives, and friends. The only exception to the above is when a watch is being worn as part of its adjustment.

Note

This is almost an absolute exclusion required because of the relative ease of "snatch and run" type losses that involve jewelry worn by wealthy individuals at a variety of social events, fundraisers, banquets, and dinners. Most jewelers do not loan out jewelry to be worn at such events. The ones that do must make extensive security arrangements to minimize or eliminate the possibility of "grab and go" type theft losses.

i. Property on Unattended Vehicles

The insurance company does not pay for loss or damage while the property is on or in any vehicle unless the insured, a full-time employee, or a person responsible for attending to the vehicle is also on or in it.

This exclusion does not apply to property that is in the custody of motor carriers or truckers, the customer parcel delivery services of railroads, air carriers, or passenger bus lines, or to registered mail in the custody of the Post Office Department.

Related Court Case: Jewelers Block Policy "In Or Upon Vehicle" Requirement Examined

 

Example: Jessica is meeting with a customer off premises. She pulls into the drive-thru line at her favorite coffee shop and waits. Her passenger window is suddenly smashed and her jewelry case snatched. She calls 911 and is able to get witnesses to support her story of the event. Because she was in the vehicle when the smash and grab occurred, coverage applies.

 

j. Property at Exhibitions

There is no coverage when loss or damage to covered property that occurs at exhibitions financially assisted or promoted by any public authority, trade association, public civic organization, private civic organization, or non-profit organization.

 

Example: Peter's displays merchandise at a few exhibitions each year. However, each of them supports local charities in their annual fund-raising efforts. Coverage does not apply to Peter's property at these events because all of them are non-profit organizations.

 

k. Property in Show Windows at the Insured's Premises

This is a theft only exclusion. Loss or damage to covered property that occurs when show windows that are at the insured’s premises are smashed and cut in order for the covered property to be stolen.

Note: Coverage for this exposure can be added by endorsement.

Example: Two individuals drive into the Jason’s building. They appear dazzled but then turn and begin removing items from the show window. Before the police arrive, the men have fled the scene. There is no coverage for the stolen items but the damage to the window and other property caused by the vehicle is covered

 

l. Property in Show Windows Not At the Insured's Premises

This is a theft only exclusion. This is similar to the above exclusion except that it applies only to show windows that are not on the insured premises.

Note: Coverage for this exposure can be added by endorsement.

 

Example: McGinty Jewels is located on the second story of a downtown building. McGinty displays items in a first-floor show window belonging to the building owner. A bold thief smashes the window with a crowbar and removes the jewels and other property from the widow. The loss is not covered.

 

m. Unexplained Loss, Disappearance, or Shortage

Unexplained loss, mysterious disappearance, and any other type of loss or shortage that is discovered through an inventory are excluded. There is also not coverage when covered property in transit disappears from intact packaging. Loss or damage to merchandise that is sent Cash On Delivery (C.O.D.) and that the consignee can inspect before it is delivered is also excluded.

COVERAGE EXTENSION

Damage to the building that is the result of theft or attempted theft is covered for up to 10% of the stated limit of liability. This coverage overage applies only if the insured owns the premises or is legally liable for such damage. This extension does not apply to loss by fire or to damage to glass and any lettering or ornamentation on that glass. The most this coverage extension and Limits of Liability a. combined pays is the limit of insurance entered.

 

Example: Paula and Jake used crowbars to rip through the doors in order to get into Precious Jewels. They had only been in a short time before the police responded to the silent alarm and arrested them. Even though no jewelry was lost, the damage to the exterior of the building was extensive. This extension pays for that the damage.

CONDITIONS

Changes

The policy is underwritten and priced for the insured that signs the application. No changes can be made to that policy without the insurance company agreeing to do so and endorsing the policy to provide those changes.

Records and Inventory

The insured is required to keep complete and detailed records of its purchases, sales, and other financial transactions as they relate to covered property. It must make them available to the insurance company or its representatives as needed to investigate and settle claims and to determine the amount of loss and the way it is paid. This requirement supersedes any other requirements in the policy that relate to maintaining such records.

Watchperson / Protective Devices

The insured must maintain all watchperson arrangements and protective devices in working order if they are listed in the Proposal for Jewelers Block Policy or are endorsed. It is not enough that the alarm system is in working order. That system must be operational, connected, and in the "on" position at all times when the premises is closed to business. The only exception to this condition is any situation that is beyond the insured’s control.

 

Example: Mavis switches on the alarm system as she leaves Bartlett’s Jewels. During the evening, a pop up storm occurs and the power around Bartlett’s goes off but the power around Mavis’s house is not impacted. She is quite surprised to discover that the store had been broken into during the power outage. Because the alarm was deactivated due to the power outage of which Mavis was not aware, coverage applies.

 Valuation

The insurance company is not liable for more than the covered property’s actual cash value at the time of loss or damage. The amount paid is never more than the amount entered in the insured's stock books, stock papers, or lists that make up the inventory in the Proposal for Jewelers Block Policy or the amount listed in the insured's stock books, stock papers, or lists that it acquired after the inventory date stated in the Proposal.

The property might be repaired or replaced for less than the amount in the insured's records or in the proposal. In that case, the insurance company is liable for only the lower amount. The valuation does not take into consideration any antiquarian or historical value. If items are being held as collateral for a loan, the valuation is limited to amount loaned that remains unpaid along with interest that had been accumulated up to the date of the loss.

Property of Others

If the property of others the insured has in its possession sustains loss or damage, the insurance company can adjust and settle the loss with the property owner. If it does, such payment satisfies any requirement the company has to pay the insured. There are cases where legal action is taken against the insured to enforce a claim for loss or damage. In those cases, the insurance company has the option to conduct and control the defense on behalf of and in the name of the insured at its own expense. However, doing so does not increase the limit of liability that applies.

c. Other Insurance

Except for the insured's legal liability, this insurance is always excess over any other coverage that might apply.

What Must Be Done In Case of Loss

The insured has certain obligations if loss or damage occurs or if it appears that a claim may be made. It must:

Note: The market value requirement is odd because the policy states that valuation is actual cash value.

Note: The term “cash value” is not a term used in the Valuation section or in the policy.

Note: The insured must provide copies of the descriptions and schedules of all such policies.

Exhibit Damaged Property / Examination under Oath

The damaged and undamaged property must be available for the insurance company or its representative to examine as often as reasonably necessary. The company must also be allowed to inspect and take samples of the property as needed to adjust and settle the loss. The insured is required to produce all writings, books of account, bills, invoices, and other vouchers as often as the company reasonably requests. Original are preferred but certified copies of these documents are permitted if the originals are lost. The insured must also permit the company or its representative to make copies as needed.

The insured, its employees, household members, and others must submit to examination under oath by the insurance company or its representative when requested.

Examinations under oath, examination of books or documents, and other acts of the insurance company or its representative cannot be used against the insurance company as a waiver of defense with respect to any loss or claim. These steps are taken to further the investigation, not to prejudice the company’s liability.

Loss Payment

The insurance company is required to pay adjusted claims within 60 days of receiving a properly prepared proof of interest and loss. The insurance company does not pay any amount for which the insured has collected from another for the same claim.

Subrogation

The named insured must assign and transfer its rights and actions against others responsible for loss or damage to covered property to the insurance company but only for the amount of the claim the insurance company paid. The legal transfer of such rights must be provided if requested. It must also allow the insurance company to bring legal action in its name. The insurance company will pay for all subrogation expenses.

Protect Property

The insured is expected to take appropriate action that is needed to save the property. The insurance company is allowed to recover, save, or preserve the property without its action being considered as a waiver of its rights or accepting abandonment by the insured.

Note: This is similar to the original "Sue and Labor Clause" in ocean marine insurance policies.

Misrepresentation and Fraud

This policy is void if the insured knowingly concealed or misrepresented a material fact or circumstance that relates to this insurance, the property covered, or its interest in it, either before or after a loss. The same condition also applies to any fraud or false swearing with respect to matters that relate to this insurance or the property covered.

No Benefit to Bailee

This insurance is for the insured and does not directly or indirectly benefit any carrier or other bailee.

Abandonment

The insurance company has the right to decide what property it will take and what property it will not take. Therefore, the insured cannot abandon property to the insurance company unilaterally.

Settlement Options

The insurance company has options regarding the settlement of the claim. It can take all or any part of the damaged property as long as it pays the agreed or appraised value. The insurance company may choose to repair, rebuild, or replace the property with similar property if it does so within a reasonable period of time. The insurance company is obligated to provide the insured with a notice of what option it will select within 60 days of receiving the required proof of loss.

Not Contributing Insurance

This insurance is excess and not contributing insurance. It pays only in excess of other coverage that is available to pay for any covered damage or loss.

Suit

The insurance company cannot be sued by anyone for recovery of a claim unless the legal action begins within 12 months after the date of loss. If state law requires a longer time, that longer time period prevails.

Note: The key is that the time period starts on the date of loss, not the date on which the insurance company and insured cannot reach an agreement.

Loss Clause

The payment of a loss does not reduce the amount of insurance available to pay for another loss.

Note: There is no aggregate limit on this policy.

Cancellation

The insured may cancel this policy by returning it to the insurance company or its agent, or by mailing it to the insurance company and stating the future date on which the cancellation is to be effective. Earned premiums are determined based on customary short rate tables and procedures. Delivering the written notice is the equivalent of mailing.

The insurance company can cancel the policy by mailing notice to the insured at its mailing address or last known address stating the future date that is not less than ten days after the insured receives the notice. Mailing the notice is sufficient proof of notice provided the date of cancellation is stated in the notice. Delivering the written notice is the equivalent of mailing.

The premium may be adjusted when cancellation takes place or as soon as practicable after the cancellation effective date and any return premium is sent to the insured.

Conformity of Statute

Policy terms within this policy that are in conflict with state law are amended to conform.

PROPOSAL FOR JEWELERS BLOCK POLICY

The application for the Jewelers Block policy is called a proposal. It is more than an application because it actually becomes part of the policy. The insured must complete every part of each section and sign it. A separate proposal is required for each covered location.

The proposal is extremely detailed and contains a General Information section, a Coverage Information section, and a Rating and Underwriting Information section with multiple sub-sections. The insured is the only one with the knowledge and information to properly complete it.

ENDORSEMENTS

A number of endorsements are available to tailor or add coverage or to add conditions and provisions. Others may be developed to respond to individual situations.

Show Window Display Coverage

The show window exclusion removed and coverage added

Property in Custody of Individuals Away From Premises

The limit of insurance can be increased for specific individuals with property off premises.

Membership in the Jewelers' Security Alliance

A credit is available if the insured is a member of the Jewelers’ Security Alliance and this endorsement is added to confirm it.

Money in Safes or Vaults

Crime coverage can be added to cover money that is in safes and/or vaults.

Supplemental Coverage Endorsement

This endorsement is used to add coverage for:

This endorsement expands coverage beyond the jewels to the entire business personal property exposure.

Replacement Cost Endorsement

This endorsement changes the actual cash value policy valuation to replacement cost as described in the endorsement.

Watchperson and Protective Devices Form

This form is a more detailed explanation of the mandatory watchperson and protective devices that are required to be in working order if coverage is to be in place.

Coinsurance Clause Endorsement (Replacement Cost)

This endorsement requires that the insured insure to at least 90% of the replacement value of covered property. It should only be attached when the replacement cost endorsement is attached.

Special Conditions Form

This endorsement adds a number of separate conditions regarding security of the premises and show windows and display cases.

Auto/Hotel/Baggage Form (Applicable To Off Premises Coverage)

This endorsement adds four specific clauses and one warranty.

Related Court Case: Consignee Held Not To Be Carrier Under Exception To Unattended Automobile Exclusion In Jewelers Block Policy

Hurricane Warning Clause

This endorsement excludes coverage for all stock not properly secured in safes or vaults for 24 hours immediately following a warning from the National Hurricane Center. Coverage on unsecured stock is reinstated immediately after the hurricane warning is cancelled but only if the hurricane did not affect the area where the insured's premises are located. If the hurricane does affect the insured's location, this clause remains in effect for at least 24 hours after the warning is issued and then only until it is cancelled.

Two Person Limitation Clause

This endorsement excludes loss or damage to covered property at the insured's premises unless there are two or more persons on the premises at the time of loss. This applies when the premises is open for business, while it is being opened or closed, or any time that an owner, officer, director, partner, or employee is on the premises. It defines premises as the interior portion of a building that the insured solely occupies to conduct its business.

Locked Door, Show Window, and Showcase Clause

This endorsement excludes loss or damage to covered property at the insured's premises unless:

It defines premises as the interior portion of a building that the insured solely occupies to conduct its business.

 

UNDERWRITING CONSIDERATIONS

Ownership and management issues are primary when evaluating a jewelry risk. The insured's financial condition dictates the degree of attention to protective devices and procedures incorporated into the business. The insured's experience in the business and hiring practices are other important elements to consider and evaluate. Developing and implementing plans, procedures, protocols, and actions to take in an emergency in advance of need are other critical factors. Maintenance and care of the premises and protective devices also affect the overall desirability and success of a jewelry business.

A jewelry risk is location based so standard property C.O.P.E. underwriting starts the process.

Related Article: ISO Commercial Property Program Underwriting Considerations

The premises location underwriting must go beyond the standard property underwriting to a much more detailed evaluation of the premises theft potential and safeguards. Where the risk is situated must be considered. Is it in a high traffic location or a more isolated location? Is it located in a shopping area with other retail locations or in a stand-alone building? Is the store located on the street level?

Next is the review of the opening and closing procedures. These procedures must be very precise and consistent. Who has the keys to the business? Who can open and close the store? Who can turn and turn off the alarm system? What are the procedures for removing items from the safe or vault? What are the procedures for returning the items at the end of the business day?

Alarm systems, safes, and vaults are very important and therefore subject to protective safeguard requirements. What type of system is in place and how is the system monitored? What types of safes and vaults are in place and are they locked at all times except when items are being removed or replaced?

Display windows are important in attracting customers but they also make the risk more vulnerable to smash and grab type burglaries. The glass should be shatterproof and the window should be locked at all times. Items should be removed from the window when the business is closed.

Jewelry may need to be taken off premises by the insured or by employees. There should be a set procedure for who can transport items and the method of transport. Salespersons and selling agents should also vary their routes and schedules to avoid developing patterns that a would-be perpetrator can capitalize on. Security issues such as traveling by personal vehicle, taxis, or other public vehicles and by foot must be evaluated, appropriate arrangements made, and procedures followed.

There may be a need to transport items using other modes of transportation. Strict accounting and sign-off procedures should be incorporated and carriers evaluated to be certain they are experienced, qualified, and up to the task.

This discussion focused more on the retail aspect but there are also wholesale repair and manufacturing operations that have significant jewelry and precious metals exposure. Similar approaches are necessary for the protection of the jewelry but specific underwriting based on the type of processing or handling is also required.