Jet Setting Service Corp. v. Toomey

91 A.D.2d 431, 459 N.Y.S.2d 751, 1983 N.Y. App. Div. LEXIS 16152
CourtAppellate Division of the Supreme Court of the State of New York
DecidedFebruary 8, 1983
StatusPublished
Cited by9 cases

This text of 91 A.D.2d 431 (Jet Setting Service Corp. v. Toomey) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jet Setting Service Corp. v. Toomey, 91 A.D.2d 431, 459 N.Y.S.2d 751, 1983 N.Y. App. Div. LEXIS 16152 (N.Y. Ct. App. 1983).

Opinion

OPINION OF THE COURT

Ross, J.

We are well aware of the hornbook principle that an insurance broker is an agent of the insured (Clinchy v Grandview Dairy, 283 NY 39). Although we are constrained to accept this principle, we believe that the facts in this case may compel a contrary conclusion insofar as this suit is concerned.

[432]*432Plaintiff is a jewelry contractor. Michael Zuckerman (Zuckerman), who is secretary-treasurer of the plaintiff, described plaintiff’s business this way: “We performed services for certain accounts in the jewelry trade, such as setting stones in rings, watches, etc.; polishing the stones; and generally creating a complete piece of jewelry”.

This work was done on plaintiff’s premises, and the jewelry and gems were the property of plaintiff’s customers, who delivered them to plaintiff for processing.

In 1977, Sears, Roebuck and Company, one of plaintiff’s accounts, requested plaintiff to obtain an “all risk” policy of insurance to protect its merchandise while it was in plaintiff’s custody.

An “all risk” policy of insurance in the jewelry trade is commonly referred to as a jewellers’ block policy.1 Despite the fact that plaintiff had been associated with jewelry processing for about eight years, it had no experience with a jewellers’ block policy, since this kind of insurance was designed for jewelry retailers, wholesalers and manufacturers, who operated in a different area of the jewelry trade than did the plaintiff.

Zuckerman, in his affidavit submitted to Special Term, stated that:

“6. Through a contact in the trade, we were advised that this coverage could be obtained through Gordon excess COVERAGE, LTD. (‘GORDON’).
“7. Accordingly, we contacted someone at Gordon by the name of John Evans. I believe that this was in November of 1977. Mr. Evans indicated that he would have someone set up an appointment to discuss the matter with us.
“8. Shortly thereafter, we were contacted by manny nussbaum. Mr. Nussbaum came to our place of business, discussed our insurance requirements, and I believe he prepared an application for insurance. We paid whatever premium was requested by Mr. Nussbaum.”

[433]*433Nussbaum processed plaintiff’s application through Gordon; and Gordon forwarded the application to the underwriters of Lloyd’s of London (Lloyd’s) who approved the issuance of a jewellers’ block policy to plaintiff in the amount of $100,000 for a 12-month period, commencing November 16, 1977.

As evidence that plaintiff was now insured, Lloyd’s sent a so-called “Cover Note” to Gordon, which Gordon in turn transmitted to plaintiff. After reading this “Cover Note”, representatives of the plaintiff believed that it was a policy of insurance.

In November, 1978 plaintiff through Gordon renewed this jewellers’ block policy for another year; but, plaintiff reduced its coverage from $100,000 to $50,000. The plaintiff paid the premium and Lloyd’s approved the reduced coverage for a 12-month period, commencing November 16, 1978. As evidence that the insurance had been renewed, Lloyd’s sent a so-called “Debit Note” to Gordon, which Gordon in turn transmitted to plaintiff.

After representatives of the plaintiff read the “Debit Note”, they concluded that it was an insurance policy.

Our examination of the “Cover Note”2 and the “Debit Note”3 lends credence to the plaintiff’s belief that they may appear to be insurance policies to one unfamiliar with the insurance business. Both of them set forth the insurance period, the amount of the coverage, the amount of the premium, the schedule of property insured, and the limitations of and exceptions to liability. Also, they each contained a list of the Lloyd’s underwriters participating in the insurance.4 Neither the “Cover Note” nor the “Debit [434]*434Note” contained any exclusion from coverage for the dishonesty of any person who worked for the plaintiff. It is undisputed that at the time that the plaintiff received them, no one on behalf of either Gordon or of Lloyd’s advised plaintiff that the “Credit Note” and/or the “Debit Note” were not intended to be anything else other than insurance policies.

Within the period of coverage under the 1978 “Debit Note”, on April 29,1979 jewelry worth more than $100,000 was stolen from plaintiff by a person by the name of Edgar Rodriguez (Rodriguez),5 a stone polisher, who did his work on plaintiff’s premises. Subsequently, $35,000 in jewelry was recovered. There is a strongly disputed question of fact as to whether Rodriguez was an independent contractor, or plaintiff’s employee.

Plaintiff promptly submitted a claim to Lloyd’s.

While awaiting the outcome of Lloyd’s investigation of the theft, plaintiff’s representatives for the first time were advised that the 1978 “Debit Note” was allegedly not the complete contract of the insurance; but that there was another policy in existence that pertained to the coverage. Thus, the plaintiff asked Nussbaum for a copy of this alleged other policy. Several months after plaintiff’s request, in August, 1979, Nussbaum forwarded to plaintiff what he claimed was the actual policy. Incidentally, in his letter of transmittal, Nussbaum simply states: “[ejnclosed please find original policy”, without offering any explanation why plaintiff had not been furnished this alleged original policy sooner.

Lloyd’s admits that it advised an insured of coverage only by sending a “Cover Note” or a “Debit Note”. During argument, Lloyd’s attorney informed the court that the policy remains with Lloyd’s in England. Lloyd’s does not contend that after it approved the coverage anyone advised the plaintiff that, besides the “Cover Note” and the “Debit Note”, there was any underlying policy that contained [435]*435additional terms, and that this policy was only available on request. In spite of the fact that it may be the custom of Lloyd’s to hold back the underlying policy, this custom is in violation of the regulations of the New York Insurance Department (Department).

The Department, in 11 NYCRR 27.7, specifically indicated how Gordon, as an excess line broker licensed in New York, who represented Lloyd’s — an entity not licensed by the State of New York — had to advise plaintiff about the effect of the “Cover Note” and the “Debit Note”, if these documents were not meant to be policies of insurance. In pertinent part this regulation reads:

“27.7 Advice to insureds as to coverage; evidence of coverage * * *
“(b) No excess line broker shall * * * transmit, to a person or entity ordering insurance to be issued by one or more unauthorized insurers, any memorandum, certificate or other document which in appearance resembles an insurance policy or gives the impression by imprinted words or otherwise that it is an insurance policy, unless such document is a policy of insurance actually issued by the unauthorized insurer.

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Bluebook (online)
91 A.D.2d 431, 459 N.Y.S.2d 751, 1983 N.Y. App. Div. LEXIS 16152, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jet-setting-service-corp-v-toomey-nyappdiv-1983.