Who owns the ring?
Here's a true story from the news, about a legal case brought to trial in Manhattan:
A man proposed to a woman and gave her a 3-carat diamond engagement ring, for which he'd paid $40,000. Less than a year later the engagement was broken off and she moved to another state, taking the ring with her. He wanted it back, she refused, so he sued her.
The local court made its decision, but the whole scenario brings up some issues that jewelry insurers would do well to consider.
Some questions on Who owns the ring?
(NOTE: Insurable interest issues can exist!)
- Does the man own the ring, because he paid for it?
- Was the ring a gift, and therefore the woman owns it?
- Does the giving and accepting of an engagement ring function as a contract, so if she breaks the engagement, she has to give back the ring?
- If the man insured the ring, could he claim it as a theft loss because the woman took it?
- If the woman insured the ring, and subsequently lost it to him in the court case or otherwise, could she claim a loss?
- On questions of ownership, does the value of the ring matter?
- Does it make a difference who broke the engagement?
- Does it make a difference whether they lived together while engaged?
- What if he insured the ring when he bought it and then she insured it after she left with it? If there's a subsequent loss, who gets the settlement?
- Would the answers be different if the couple had been married, and the marriage ended?
Some answers – and some insurance considerations
The local court determined that, according to the law in New York (where the trial was held), if no marriage takes place the engagement ring must be returned, or she must reimburse him for the purchase. That is, the man is the owner of the ring. (Just a note: It's possible that decision would be different in another state, and it might even change if it were challenged in New York.)
The man had a sales receipt for $39,057.10, and he'd insured the ring for $40,000. In this lawsuit, the court said the value did not matter. But let's look at things from an insurance point of view. As part of the case, the woman had argued that the ring was worth no more than $13,000. The news report did not state how she arrived at this value. Perhaps she had the ring appraised when threatened with a lawsuit.
We can't help but wonder at that huge value discrepancy!
Was the buyer snookered by a grossly inflated price? Or were there perhaps two receipts, one to impress the girlfriend and a second document showing proof of payment for a lower amount? Inflated prices and valuations are all too common, as we've frequently discussed (Moral hazard, Appraisal Inflation, Inflated pricing), and many consumers are victimized because they don't take the extra step of getting an appraisal from an appraiser independent of the seller.
If the woman had the ring appraised, and the valuation she got was $13,000, was the appraiser professionally trained and reliable? Or was he "doing her a favor" by low-balling the valuation? We know there are unscrupulous appraisers who inflate valuations (to "help the client with insurance", or to justify allowing the insured to replace at expensive stores, such as Cartier, Tiffany, etc.). This might be an instance of an appraiser purposefully deflating valuation, to help the client win her court case.
Was coverage based only on the actual purchase price? Did the insurer ask for an appraisal from an appraiser independent of the seller, in order to verify the valuation?
For an insurer to base jewelry coverage solely on the purchase price would be poor practice and could lead to extreme underpayment or overpayment on settlements. Jewelry of this price point should have at least one appraisal from a reliable appraiser who is professionally trained and independent of the seller.
Another question is, how was the $40,000 ring insured? If the man assumed that his Homeowner policy covered it, a loss might have brought an unpleasant surprise. HO coverage for jewelry is typically limited to $1500 per item or $2500 total.
The "Who" question
Several of the questions we raised above have no easy answers or solutions. But in the event of a loss, the important question for insurers is: Who has an insurable interest in the jewelry?
According to policy language, "insured" means the named insured, resident spouse, and resident relatives.
Say a man buys a ring for his beloved and insures it on his own policy:
- If the couple is not married, even though they may be living together the woman would not be covered — unless she is also named on the policy.
- If they are married and living together, the woman is covered; but if she moves out, she loses coverage — unless she was also named on the policy.
In most cases with jewelry insurance, more than one person can have an insurable interest. For people who are married or engaged or have a partner, both parties should be named on the policy.
Most insurers do not routinely do this. They may not even allow it. Most carriers of Homeowner insurance won't add a fiancée or partner because of the liabilities associated with other coverage in the policy.
The best solution is to insure jewelry under a standalone policy through a carrier that allows both parties to be listed on the policy.
To protect the insured's Homeowner coverage, seek out a jewelry insurer that does not report to CLUE or other claim data services. With today's increasing weather catastrophes, it is especially important to not let a jewelry loss make an insured ineligible for Homeowner insurance.
FOR AGENTS & UNDERWRITERS
For insuring jewelry, it is best to have both parties with an "insurable interest" named on the policy. This is especially advisable for all couples, whether married, engaged (or about to be engaged!), or partnered.
A stand-alone jewelry policy (Personal/Valuable Articles Floater—PAF) allows naming on the policy both parties with an insurable interest in the jewelry. To avoid impacting the insured's Homeowner coverage, seek a standalone jewelry policy from an insurer that doesn't report to CLUE or other claim data services.
You can offer your client the best HO policy at the best price, then offer a standalone policy for the jewelry from a company specializing in personal jewelry coverage and allowing naming more than one party with an insurable interest.
A standalone policy is especially important for larger schedules, which may exceed the HO carrier's comfort level/capacity or per-item limits. It behooves an agent to cultivate a relationship with a carrier that has no such limitation.
FOR ADJUSTERS
A standalone jewelry policy benefits the adjuster because the separate application usually requires more information specific to the jewelry, as well as better jewelry documentation.
Be sure to ask the underwriter for appraisals, sales receipts, gem reports, photographs, and any other information on file. If such documents are not on file, collect this info from insured, the selling jeweler, and/or appraisers.
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