Supreme Court of New York, Appellate Division, First Department
Clayman & Rosenberg, New York (Paul S. Hugel of counsel), for appellant.
Clausen Miller, P.C., New York (Don R. Sampen, of the State of Illinois Bar, admitted pro hac vice, of counsel), for respondent.
Gonzalez, P.J., Tom, Friedman, McGuire, Acosta, JJ.
Order, Supreme Court, New York County (Milton A. Tingling, J.), entered March 13, 2008, which, insofar as appealed from, denied plaintiff's motion for summary judgment for full coverage under the subject insurance policy, affirmed, with costs.
Isaac Nussbaum, the principal of plaintiff Nussbaum Diamonds, LLC (Nussbaum), had a jeweler's block insurance policy issued by defendant The Hanover Insurance Company (Hanover), which he purchased on September 30, 1995. The policy covered Nussbaum's company against "all risks" of loss or damage to its merchandise for up to $4 million while in his store, subject to certain exclusions. Effective November 14, 2005, the parties amended the policy to add an endorsement providing coverage for up to $500,000, subject to a $10,000 deductible, for merchandise carried out of the office by a jewelry salesman named Yoel Grun. The "Insuring Conditions" section of the amended Policy contains a number of exclusions, including the following:
"(5) THIS POLICY INSURES AGAINST ALL RISKS OF LOSS OF OR DAMAGE TO THE ABOVE DESCRIBED PROPERTY ARISING FROM ANY CAUSE WHATSOEVER EXCEPT...:
(M) Unexplained loss, mysterious disappearance or loss or shortage disclosed on taking inventory..."
On October 25, 2005, the condition (5)(M) exclusion was amended as follows:
"It is understood and agreed that the Policy is extended to cover Mysterious Disappearance up to a limit of $250,000."
On the evening of November 28, 2005, Yoel Grun and Blair Grossbard left on a trip to sell diamonds for their employer, nonparty Espeka Fancy Diamonds (EFD). The two planned to make sales calls to EFD customers in Rochester, New York, and West Hartford, Connecticut. Grun rented a car and met Grossbard at EFD's offices. Grossbard collected the jewelry and separated it into two blue bags, one for each salesperson. These bags and Grun's computer bag were all placed in the back seat of the car. Although Grun worked for EFD, he occasionally sold Nussbaum's diamonds while on EFD trips. Grun was paid commissions for sales of Nussbaum's merchandise. Prior to this trip, Grun told Nussbaum about his sales meetings in Rochester and West Hartford, and he agreed to take some of Nussbaum's diamonds with him.
After leaving EFD's offices on the evening of November 28, Grun picked up a diamond ring and four loose diamonds from Nussbaum's office, signed for them, and placed them in a 6½ inch leather pouch. He clipped the pouch inside the waistband of his pants.
Grun and Grossbard then drove to Grossbard's apartment on the Upper East Side. On the way, Grun felt uncomfortable with the pouch in his waistband. He removed it and asked Grossbard to put it in his computer bag in the back seat. She refused, telling Grun that she was nauseous and did not want to turn around in a moving car. She handed the pouch back to Grun. He thought he remembered placing the pouch in the front right pocket of his pants. 
Between Nussbaum's offices and Rochester, Grun got out of the car four times. First, he pulled over on 82nd. St and Third Avenue, near Grossbard's apartment. While Grossbard went to get her things, Grun got out of the car and went into a nearby 7-11 store. He carried the two EFD bags with him, made a cup of coffee and bought some sandwiches. A surveillance video in the store showed that Grun left the EFD bags on the floor in front of the cash register and walked away on two occasions, once for approximately seven seconds and again for approximately ten seconds. After paying with a credit card that he put into his right pants pocket, Grun returned to the car. Grossbard then came downstairs with her husband. Grun got of the car again to greet Mr. Grossbard and they placed Mrs. Grossbard's luggage in the trunk of the car. Grun exited the car on two other occasions before reaching Rochester: once to change drivers several hours into the trip and a second time to use the bathroom and buy some items at a Fastrac gas station.
At about 3:00 a.m., Grun and Grossbard arrived at the Homeward Suites hotel. The two didn't like the way the hotel looked, and without getting out of the car they proceeded to a Hyatt in downtown Rochester. When Grun parked in the Hyatt parking lot, he realized that he was not carrying the Nussbaum diamonds. He got out of the car, checked his pockets, and asked Grossbard if she had seen the jewels. She said no, and Grun searched the car, checked all of his bags in the car and in the trunk, and asked Grossbard to do the same. Grun thought it likely that he had misplaced the diamonds when he stopped at the 7-11 in Manhattan, and Grossbard called the store to see if a leather pouch had been recovered. He ...