Missing Diamond at Issue in Recent Court Case
In a recent case in the state of New York, the plaintiff insurance company commenced an action for a declaration that it had no duty to defend or indemnify a defendant in an action that stemmed from the loss of a diamond.
The plaintiff insurance company claimed that coverage was unavailable because the defendant breached a warranty of the insurance policy and failed to meet a condition precedent to coverage, as there was no working security system at the time of the loss.
The defendants filed a motion for summary judgment, claiming that the non-functioning security cameras did not constitute a breach of the policy’s alarm and protection clause.
The court denied the defendant’s motion for summary judgment, granted the plaintiff’s motion for summary judgment, and declared that the defendants were not entitled to a defense for indemnification from the plaintiff. The defendants appealed.
The court found that the defendants breached the warranty in their insurance policy and failed to meet a condition precedent to coverage by failing to have a working security alarm system at the time of the loss. The court pointed out that the defendants were not prejudiced, as the requirement to maintain an operational security system was explicitly stated within the policy terms.
The defendant’s contention that the non-functioning security cameras did not constitute a breach of the policy’s alarm and protection clause was unavailing.
The policy’s alarm and protection clause must be interpreted in such a way to give meaning to every provision, so that no provision is left without force and effect. Section (d) of the clause . . . “all other protections provided for the safety of the insured property” plainly pertains to the entire burglar alarm system at issue, including the security cameras, which must be operable at all times.
Accordingly, the court held that this provision is material to the risk of loss under the policy, as functioning security cameras could have provided evidence as to how the missing diamond disappeared.
Therefore, the court denied the defendant’s motion for summary judgment and granted the plaintiff’s motion for summary judgment, declaring that the defendants were not entitled to a defense or indemnification from the plaintiff in the underlying action.
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