Southern Jewelry News

The robbery that Jewelers Block didn’t cover

09:45

February

2008

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Article Autor: Bob Carroll

The Best Policy

It began as a normal day in the jewelry business for Jim Sandrox - normal that is until three masked gunmen barged into his store and ordered everybody to the floor.

The crooks knew which showcases carried the store’s most expensive jewelry, and after emptying those cases, two of them went to the safe that held the diamond wallet while the other gunman emptied the repair boxes that were in the shop.

In addition to the stock and customers’ goods that were stolen, the thieves also grabbed a stack of shipment packages that had been delivered just before the robbery began.

Jim had known that standard business insurance did not insure jewelry property – neither his stock nor jewelry belonging to vendors or customers, and so he carried the kind of insurance that is intended to fill that gap – Jewelers Block insurance.

When the robbery itself was over and he was assured that no one in his store had been harmed physically, Jim called first the police and then his insurance agent.

The insurance company sent an insurance adjuster to the store to investigate the loss and direct Jim as to the documentation that would be needed in order to prove the loss so that it could be paid by the insurance company. Jim grew to appreciate his own efforts over the years in terms of maintaining good inventory records. He had always believed that good records were an important aid in running a successful business - and they had been, but now those same records would greatly ease his burden of determining just how much and even which items had been stolen.

For the most part, Jim’s staff was dealing with their personal trauma from the robbery as well as could be expected. The insurance company offered assistance for counseling, and all but one person had chosen to continue to work in the jewelry store. But that one, Susan, an employee for several years, had been so disturbed by the crime that she had not been able to return to the store at all and had simply called in her resignation.

In the meantime, the police department continued their own investigation of the robbery.

In time, Jim was able to compile the information needed to quantify the loss and all of the documentation was in the hands of the adjuster for review. Jim hoped to soon receive a check from the insurance company – he felt that the future of his business was contingent upon this insurance coverage.

Then one afternoon, Detective Flanagan came into the store with good news.

The police had broken the case and five suspects were in custody.

“Five? But there were only three gunmen in the store.”

“There was a get-away driver waiting outside for them in a stolen van,” explained Det. Flanagan, “plus one other person.” He continued, “The leader of the gang has a cousin who provided a lot of helpful information, such as which showcases were most important and where the loose diamonds and customers’ goods were kept. This person was also able to tip the gang off as to when a vendor shipment had arrived.”

Incredulously, Jim asked, “Who could have given them that kind of information?”

“Her name is Susan.”

Jim’s heart sank to think that someone he had trusted as an employee had betrayed both him and the people she worked with.

“What about the jewelry?”

“It’s all gone. It was fenced almost immediately for a fraction of its value and the money split up by the gang – most of it eventually going for drugs.”

Insurance question:
Does this new information affect the settlement of the insurance loss? Judge for yourself.

While specific policies vary company to company, there are many common aspects of Jewelers Block insurance that is virtually always consistent. Here is one of them, found in the “Exclusions” section of the policy:

“We will not pay for loss or damage caused by or resulting from any of the following:

... Dishonest or criminal act committed by:
... You [the insured], or any of your partners, your employees, directors, trustees, or authorized representatives...

This exclusion applies whether or not such persons are acting alone or in collusion with other persons or such acts occur during the hours of employment.”
(from ISO policy format for Jewelers Block insurance, underlining added for emphasis)

Susan was an employee of the jewelry store that was robbed, and indications came to light that she was instrumental in setting up the crime - even in planning some of the details. So was the loss caused by or did it result from her dishonest or criminal act?

Note that the final statement in the exclusion says that it does not matter that the employee (Susan) was acting in collusion with others. Nor would it have mattered if the crime had taken place after store hours (for instance, a burglary).
Most jewelers are peripherally aware that “employee fidelity” is not covered by Jewelers Block insurance, but they generally think of the risk as being that of petty pilfering or “misappropriation” of money or a few items of merchandise. Few jewelers are aware of the ramifications that the exclusion can have if connected to a major loss such as a burglary or robbery.

What’s the answer?

Employee Dishonesty insurance is generally available as either a separate policy or as an option under a jeweler’s general insurance program – that which covers liability and non-jewelry property. It’s worth considering, no matter how certain one might be of one’s associates.

Suppose Susan had not joined the staff of Sandrox Jewelry specifically to set up a robbery. Perhaps she initially had every intention of being a valuable and loyal employee. But unknown to Jim and to her co-workers, Susan had a substance abuse habit – or had a relative or friend with a criminal background who had powers of coercion over her – or for a variety of reasons about which we might speculate, which led her to become instrumental in this crime. Would any of the reasons behind Susan’s acts have changed what was clearly stated in the Jewelers Block policy?

Susan was still an employee, and the loss was the result of her dishonest action.
What can be learned from this scenario (which is true only in substance, not the actual event or persons)?

It implies the importance of careful hiring practices for every aspect of the jewelry industry. It is prudent for a prospective employer to always check both employment histories and references, and to account for any gaps in employment. Can previous employers legally provide more than, “Yes, the individual was employed by us from this date to that date.”? Yes, they can and often do.

With a prospective employee’s signed permission, credit history can also be checked – something which may reveal patterns that might bear on an individual being employed in an environment of “very small items of high value.”

Additionally, criminal history is generally a matter of public record and is available in many jurisdictions over the Internet. Check with your attorney or insurance professional for publicly available resources within your state.
This situation also may say that employee dishonesty can occur in forms that some may not have considered in the past – and that significant levels of this type of insurance coverage are worth considering.

Bob Carroll of Robert G. Carroll and Associates is a Certified Insurance Counselor who has specialized in meeting the insurance needs of the jewelry industry for more than 25 years – representing Jewelers Mutual and other insurers in Arkansas, Oklahoma, Mississippi, and Tennessee. Contact Bob at www.robertgcarroll.com or bob@robertgcarroll.com.