No Point in “Wining” About It — No Coverage for Missing Wine
In an interesting case about wine and wine collectors, purchasers of fine wines sought coverage for wine they ordered from a seller but never received. Turns out the seller was running a wine Ponzi scheme and hundreds of customers never received thousands of bottles of wine ordered. The case reached the Tenth Circuit Court of Appeals. Was there coverage?
In Hasan v. AIG Property Casualty Co., No. 18-1309 (10th Cir. Aug. 27, 2019), the policyholders had a “Private Collections” insurance policy that covered valuable articles. Valuable articles were defined as personal property “you own or possess.” The policy insured against “direct physical loss or damage” to the valuable articles. The policyholders apparently were caught up in a wine Ponzi scheme where they ordered wine from a wine merchant that actually did not order or deliver much of the wine it promised. The principal of the wine merchant admitted stealing $20 million worth of phantom wine and his company went into Chapter 7 bankruptcy.
The policyholders sought to recover some of their losses through their insurance policy. They claimed that the policy provided immediate coverage at the time of purchase for new acquisitions. They also claimed that they were covered for “in transit items.” The insurance carrier denied coverage on the ground that the policyholders did not own or possess the wine and did not suffer a direct physical loss to the wine. The policyholders sued and the carrier moved for summary judgment. The district court granted summary judgment because there was no evidence of direct physical loss or damage to the property.
On appeal, the Tenth Circuit affirmed. As the court stated, the policyholders conceded that they were not seeking to recover a loss from a Ponzi scheme in which wine was never bought or was sold to multiple customers. They contended, according to the court, that the funds they sent to the wine merchant were used to purchase specified bottles of wine, which had not been delivered to the policyholders, so they must have been lost or damaged. The court rejected this argument for lack of adequate evidence. The court held that “[a]bsent evidence that any of the 2,448 ordered bottles of wine were actually purchased by [the wine merchant], much less specifically purchased for Plaintiffs, Plaintiffs have failed to carry their burden on an essential element of their insurance claim–that there are unaccounted for bottles of wine that they owned.”