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October 29, 1991


The opinion of the court was delivered by: Lowe, District Judge.


Before this court is plaintiff Saritejdiam, Inc.'s ("Saritejdiam") motion for summary judgment pursuant to Fed.R.Civ.P. 56. Defendants Excess Insurance, et al. ("The Underwriters") oppose this motion.


Saritejdiam is a company engaged in the wholesale trade of diamonds, other gems and jewelry. Affidavit of Yogesh K. Madhvani, at 1 (hereinafter "Madhvani Aff"). In June, 1988, the Underwriters, a group of London based insurance companies, issued an insurance policy ("The Policy") to Saritejdiam. The Policy is an "All Risks" type, called a Jewelers Block policy, which insures against all risks of loss or damage, unless specifically excepted by the policy. See Exhibit A to Madhvani Aff.

On May 13, 1989, Robert Danilin, an independent contractor/salesman for Saritejdiam, lost a shipment of diamonds valued at $267,514.30 while eating in a diner in upstate New York. Mr. Danilin left his diamond case on a chair, and a witness has stated that the case was subsequently picked up by another patron of the diner. See Plaintiff's Memorandum in Support of Motion for Summary Judgment at 2 (hereinafter "Plaintiff's Memo"). On the same day, Saritejdiam reported the loss to the Underwriters pursuant to the terms of the Policy. Madhvani Aff. at 3. After investigating the claim, the Underwriters refused to cover the lost diamonds, claiming that Saritejdiam and Danilin had not complied with the terms of the Policy. Madhvani Aff. at 3.

At issue before this Court on the motion for summary judgment is the interpretation of a particular part of the Policy, entitled the "Personal Conveyance Clause." This section states that the policy "only covers the Insured interest in transit when in the close personal custody and control of the Assured and/or Assured's representative and/or agent at all times whilst in transit subject to hotel/motel clause, excluding all losses due to infidelity." See Exh. A to Madhvani Aff. (emphasis added). Saritejdiam contends that it and Danilin were acting in compliance with the terms of the Policy when the diamonds were lost. The Underwriters, however, claim that, by leaving the diamonds unattended, the plaintiff failed to comply with the terms of the Personal Conveyance Clause and, therefore, the loss is not covered. See Answer at 3; Exh. E to Madhvani Aff.


Under Rule 56(c), a party's motion for summary judgment should be granted if there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) ("[S]ummary judgment will not lie if the dispute about a material fact is 'genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) ("[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.") In this case, the parties agree upon all the material facts; therefore, it must be determined whether or not Saritejdiam is entitled to a judgment in its favor, according to these facts, under New York law.

I. Saritejdiam's Argument

This case turns on the construction of the Personal Conveyance Clause, particularly the phrase "close personal custody and control." It is a well-established principle of insurance law in the state of New York that "if there be doubt or uncertainty as to the meaning of language in [a] . . . policy, any resultant ambiguity is to be resolved against the insurance company." Milstein v. Ortner, 65 Misc.2d 649, 318 N YS.2d 629, 632 (N.Y. Civ. Ct. 1966); see also Lavanant v. General Acc. Ins. Co., 164 A.D.2d 73, 561 N.Y.S.2d 164, 168 (1st Dep't. 1990) ("It is a well-settled tenet of construction that any ambiguity in an insurance policy must be construed against the insurer, the draftsman of the policy."). Therefore, if the parties can present more than one reasonable interpretation of the phrase "close personal custody and control", the binding construction will be Saritejdiam's.

As discussed at the hearing before this Court on February 8, 1991, the case of Viviano v. Jewelers Mutual Ins. Co., 115 Misc.2d 518, 454 N.Y.S.2d 404 (Dist.Ct. 1982) illustrates the way in which such language is interpreted in New York. In Viviano, the plaintiff's engagement ring was covered by a "comprehensive all risk policy", called a "personal property floater policy". Id. at 521, 454 N.Y.S.2d at 407. While eating dinner at a restaurant, Ms. Viviano went to the ladies' room, removed her ring and placed it on the basin. When Ms. Viviano left the ladies room, she forgot the ring, and it was never recovered. Id. at 519, 454 N.Y.S.2d at 405.

Ms. Viviano's insurance policy contained a passage which stated that there would be no coverage if insured items were lost while not in the "care, custody and control" of the insured. Id. Her insurance company, in moving for summary judgment, argued that the exclusionary passage was clear and unambiguous and, in their view, the ring was not in Ms. Viviano's care, custody and control when she lost it, her loss was not covered under the policy. The court, however, did not consider the phrase to be clear and unambiguous, accepting as another reasonable interpretation Viviano's conclusion that the exclusion only became binding if the insured intentionally relinquished "care, custody and control", which she did not. In addition, the court's own research suggested that "care" is an indefinitely defined term, that "custody" can be constructive and that "control" can be qualified. Id. at 520-21, 454 N YS.2d at 406-07. The court found the phrase "care, custody and control" to be ambiguous and held that, since Ms. Viviano's was an all-risk policy, coverage "[could] . . . arise even when the insured is negligent and . . . the public policy of this state [is] to construe an insurance policy least favorably against the drafter if ambiguity is found." Id. at 521, 454 N YS.2d at 407. The defendant was ordered to honor Ms. Viviano's claim.

As discussed at the February 8 hearing, the parallels between Viviano and the case at bar are striking. Both involved all-risk policies and the inadvertent mislaying of jewels in a restaurant. Both involved insured parties who filed timely claims while still covered. Finally, both policies contained very similar language; the Viviano policy using "care, custody and control" and the Saritejdiam policy reading "close personal custody and control." In light of the parallels, unless ...

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