10th Circuit decision on lack of insurance coverage for wine collection means taking inventory and ensuring off-site purchased and stored collectible wines, spirits and beer may be best bet to ensure you’ll have coverage in case of a loss.
A “Ponzi scheme for wine” – that’s how the government summarized the operations of the wine merchant who ran the now-defunct Premier Cru in Berkeley, California. Customers bought wine and wine-futures from Premier Cru and were not always in direct possession of the wines they “owned” through purchases made from Premier Cru. Importantly, they were not always able to confirm that the wines were in the possession or ordered by Premier Cru – either because they were stored at Premier Cru when purchased and never sent to the customer, the customer wanted to take possession but Premier Cru never shipped, or because the wine future wasn’t yet due to be purchased (and sadly was never actually purchased).
This all mean that when Premier Cru went under with much less wine than it needed to satisfy all the customers it claimed to have purchased collectible wines for, many customers were left without wine.You can read the full details about how many of the customers of Premier Cru lost their money and how in bankruptcy, the court tried to cut a deal regarding what wines Premier Cru did possess in the opinion in this case here.
One such couple that lost money on wine they thought they’d purchased from Premier Cru but were never delivered (and that Premier Cru never purchased) filed an insurance claim under their Private Collections insurance policy (if you collect art, wine, spirits, cars, etc., Private Collections insurance is something you should have) asserting that they lost their wine when Premier Cru went bankrupt. The Private Collections insurance they had insured against “direct physical loss or damage to valuable articles anywhere in the world unless stated otherwise in the policy” and defined valuable articles as “the personal property you own or possess…”
The insurance company challenged the claim arguing that the couple never “owned or possessed” the wine so the loss could not be to wine “owned or possessed” by the couple. The couple sued requesting a court determine they had coverage arguing to the court that because other bottles were actually shipped to them, the bottles they didn’t receive could be inferred to exist. But the court determined that the couple had failed to show a direct physical loss or damage to the wine as there was no evidence about actual bottles being lost. The couple appealed.
While the district court had found that the wine purchasers hadn’t shown “physical loss or damage” to the wine they’d ordered, the 10th Circuit affirmed the decision to deny coverage on a different ground – that the wine purchasers had not shown they were actual owners of any wine bottles that weren’t delivered by Premier Cru, rejecting the contention that the court could infer that prior purchases being delivered amounted to proof that Premier Cru had actually ordered the couple’s wine and just failed to ship it. Because the couple could not properly establish that Premier Cru had actually ordered the wine for them, they could not establish that it existed and meet the “own or possess” criteria for coverage under the policy.
Takeaway: Basically, unless you prove it exists, you won’t have coverage under this interpretation. So for those of you trading in wine and never actually confirming that the bottles exist at a third-party merchant’s wine storage facility, you could find yourself out of luck if they ever suffer a loss and cannot show the wine was purchased and stored there.
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