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Nussbaum Diamonds, LLC v. Hanover Insurance Co.

July 28, 2009

NUSSBAUM DIAMONDS, LLC, PLAINTIFF-APPELLANT,
v.
THE HANOVER INSURANCE COMPANY, DEFENDANT-RESPONDENT.



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.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Gonzalez, P.J., Tom, Friedman, McGuire, Acosta, JJ.

604038/06

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 61/2 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.*fn1

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 also asked Grossbard to call her husband to ask him to look around their apartment and on Third Avenue, where the car had been parked, to see if there was a leather pouch on the ground.

The two drove to a parking area near the Hyatt and discussed retracing their steps back to New York City. They also discussed possible locations where the diamonds could have been lost. They eventually decided that they were too exhausted to drive back to the city. They checked into the Hyatt, went to a room, and searched their bags again inside the hotel. It was now approximately 5:00 a.m.

At Grossbard's urging, Grun tried to get some sleep. At 9:00 a.m. on November 29th, Grun called Nussbaum and told him that he had lost the diamonds. Nussbaum instructed him to call the police and get a report. Grun attempted to do so. However, the Rochester police refused to issue a report because the pouch containing the jewelry had last been seen in New York City. The New York City police also refused to issue a report, contending that Rochester had jurisdiction.

On November 29, 2005, Nussbaum contacted Hanover about the lost diamonds. Hanover's claims adjuster conducted an investigation and determined that there was coverage under the policy, but that because the loss qualified as a "mysterious disappearance," the amount of the loss in excess of $250,000 was excluded. The adjuster also noted discrepancies between Grun's and Grossbard's accounts of the events. When Hanover failed to pay, Nussbaum commenced this action, seeking $490,000 (the $500,000 policy limit less the $10,000 deductible), plus interest. Hanover answered, denied liability, and asserted nine affirmative defenses. Nussbaum then brought a motion for summary judgment for (1) the $240,000 defendant conceded was owed and (2) payment of the remaining $250,000. While the motion was pending, Hanover paid the $240,000, without interest, but opposed that portion of Nussbaum's motion ...


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