“Whiskey Fraud” – is there insurance for that? In recent suit, business looks to insurance to recover for missing spirits.
Those readers that remember the wine fraud travails of investors and collectors deceived by Kurniawan may remember the disappointing result regarding the insurance claims over the valuable property policy dispute that left (you can read our article on that wine fraud insurance issue here) wine purchasers in the lurch on account of insurance covering theft or losses to the wine but not fraud in the wine not amounting to what they thought they’d purchased.
With the advent of 10,000 Pappy, whiskey fraud has very much been a known problem on the Facebook trading groups that traffic in high-end collectible spirits. A recent case has brought to light the two types of insurance those looking to undertake investment endeavors might want to pursue and how they may want to negotiate or enhance coverage with different endorsements.
The booming business of trading and investing in elite whiskies is at issue in this case where a high-end whiskey buying business is bringing claims against its insurance company for failing to pay out on claims made for whiskey it asserts was stolen. You can read the complaint in this whiskey fraud case here.
From the complaint, the company was formed to acquire, store, and eventually resell whiskey and wine. A knowledgeable buyer and member of the company provided lists to another member with money who funded the company’s purchases. The company purchased a collection appraised at $9.84 Million for the whiskey and $518,000 for the wine. The collection allegedly contains(ed) approximately 10,035 bottles of whiskey. The funding member started requesting inventory and storage location information from the purchasing member and when the purchasing member couldn’t get it done, the funding member hired a risk manager who took an inventory resulting in finding only 4,293 of the 10,035 bottles. The initial explanations from the purchasing member involved bottles being stored in Europe and being incapable of being shipped, but since the initial discussions between the members, the allegations are that the purchasing member has gone radio silent.
The company made a claim for the missing whiskey under both its commercial crimes policy (covers employee theft) valuable articles policy (inventory loss on your expensive wines and whiskies) and the insurance companies investigated and denied coverage. So the company brought the lawsuit (link above) asking a court find it should be covered under one of the two policies or both. E.g, either the purchasing member didn’t purchase the whiskies and took the money (commercial crimes), or the whiskies were stolen (inventory loss).
No response is due yet. Reviewing the complaint, you can see the actions the company took to ensure broader coverage by securing custom endorsements under the commercial crimes policy and how the investigation and pursuit and reporting requirements under the valuable articles policy should be followed.