Facts

In October 2000, the defendant Antonio Sadeghini contacted Dawn Westbrook, a FIE agent to obtain insurance coverage for his jewelry collection. The agent informed the defendant that to obtain such coverage, each item would need to be appraised and photographed. Such coverage would be scheduled on a floater policy and added to the defendant's renter's policy. The agent explained to the defendant that in the event of a loss under the jewelry floater policy, the loss would be settled under one of two scenarios. The policy affords the carrier the option to pay the loss in the amount of the appraised value or the amount for which the items could actually be replaced - whichever is less. The defendant disputed that the agent explained this provision to him. In November 2000, the agent took an application over the phone. The defendant obtained the necessary appraisals from a friend in the jewelry business and the policy was eventually issued on Nov. 6, 2000 with limits of $194,600. However, two days later on Nov. 8, the policy was amended to reflect a reduction in coverage with limits of $182,005 due to certain underwriting guidelines for minimum values on scheduled articles of jewelry. An amended declarations page and a revised jewelry floater endorsement reflecting the decreased limits were sent to the insured. On Dec. 24, the defendant claimed that his apartment was burglarized and all scheduled jewelry items were taken, except those on his person. The defendant submitted a claim in excess of $179,000. After a lengthy claims investigation during which four sessions of the defendant's examination under oath were taken, the claim was paid in the amount of $138,833 - the actual amount for which the items could be replaced by a local jewelry replacement company. The defendant disputed that the items could be replaced for the amounts set forth by FIE since its appraiser never examined the jewelry. During the claims investigation, the counsel for the defendant requested a copy of the policy as the original was no longer available. On four occasions, reconstructed policies were ordered and on each occasion, the reconstructed policy omitted the loss settlement provisions of the jewelry floater. Counsel for the defendant argued that the original policy was never received by the defendant, or, in the alternative, if it was received, it was lacking the loss settlement provisions as were the reconstructed versions and as a result were in violation of Insurance Code Section 381.2 thereby requiring the appraised value to be paid. The defendant argued that he did not receive the policy from FIE and the only policy document in his possession, an amended Declarations page was printed out and given to him by agent Westbrook. The agent indicated that the defendant told her he needed a replacement copy of the policy, as the defendant misplaced the original policy or had given it to an attorney in Northern California who handled some business for him. FIE disputed the non-receipt and any omission of policy provisions from the original policy issued from FIE's Home Office IT Department in Los Angeles. The reconstructed policies were recreated in regional offices using specimen copies of the actual forms rather than generated in the same manner as the original policy documents. The defendant threatened a bad faith lawsuit to recover the difference. Rather than await for the insured to file litigation, FIE sought guidance from the Superior Court and filed the instant DRA. The defendant demanded, at the very least, that FIE pay the unearned premium which was due him under the policy even under FIE's interpretation of the policy. The unearned premium was never paid the insured despite repeated demands.

The plaintiff FIE contended that the original policy was complete and was received by the defendant. The Home Office computer system had numerous redundant systems to ensure that all policy documents were complete and were properly mailed to the insureds. In addition, the jewelry floater policy language and its appearance not only complied with the Insurance Code but also had been previously approved by the California Department of Insurance and an internal review by the Corporate Legal Counsel of Farmers. The plaintiff FIE also contended that the defendant's possession of the Amended Declarations page proved his actual receipt of the policy. Contrary to the defendant's contentions, it was an impossibility for the agent to have generated the document in his possession. Further, as the amended declarations page was a change document it was folded in a manner to facilitate its mailing in a standard business window envelope, displaying the insured's address - the policy document in the defendant's possession evidenced such folding. In addition, according to testimony from the IT Edge Department manager, the system could not have generated the Amended Declarations page without the revised jewelry floater endorsement accompanying it. The plaintiff also contended that the four reconstructured policies created by regional office service centers were not generated with the same procedural system safeguards as the original policy documents and a subsequently generated duplicate original policy created using the Home Office computer system contained the necessary loss settlement provisions. In the alternative, the plaintiff FIE asked the court to reform the policy based on the computer equivalent of "scrivener's error" to contain the needed language should there be a determination that the policy as issued was lacking the standard loss settlement provision. The plaintiff FIE also contended that the defendant's testimony was so rife with contradictions and inconsistencies as to render it of no convincing force as to these issues. The defendant and his counsel submitted 16 pages of changes to his examination under oath testimony alone. The plaintiff contended that the defendant's recollection of dates, events and conversations were so inherently untrustworthy that he was either fabricating the testimony or his cognitive abilities so impaired as to render his testimony of no evidentiary value. DEFENDANT CONTENTIONS:
The defendant contended that he was never provided with a policy containing the loss settlement provision which FIE was attempting to enforce and that pursuant to Ins. Code Section 381.2, he was entitled to be paid the amount stated on the jewelry floater endorsement if no alternate loss settlement provision was provided. He also contended that he was entitled to, at the very least, the return of his unearned premium is so far that this sum represented an undisputed sum owed him under FIE's interpretation of the policy. This sum was demanded by the defendant on numerous occasions without reply by FIE. The defendant contended that when he requested a copy of the policy, FIE produced three versions of the policy, none of which contained the loss settlement provision including a policy produced with an "Affidavit of Policy" stating that it was a reconstructed copy of his actual policy. Finally, the defendant contended that appraising his jewelry following the loss for the purpose of determining its replacement value was inherently flawed as FIE's appraiser had no opportunity to inspect the subject jewelry and therefore he had no way to properly evaluate its value. In the declaratory relied action, the defendant argued that he was entitled to be paid pursuant to Ins. Code Section 381.2. FIE, two months before trial, produced a fourth policy, which it contended was the accurate version of the subject policy, which was reconstructed by a different department as FIE. * * *

Settlement Discussions

None

Damages

No damages were awarded FIE. The court held that FIE had acted in conformity with the policy but it did owe defendant a refund of the unearned premium. FIE was determined to be the prevailing party.

Injuries

* * * (CONTINUATION OF DEFENDANT CONTENTIONS) This version contained the loss provision but it also evidenced an incomplete mailing address. At trial, FIE developed a final theory evidencing the forwarding of the complete policy to the proper address and also argued, in the alternative, for the reformation of the policy to include the subject language. The defendant contended, among other things, that (1) he never received the subject policy; (2) that FIE waived its right adjust his claim based on the loss provision when it produced three copies without it including one which included an affidavit of actual policy; (3) that FIE waived its right to adjust his claim based on the loss provision when it had evidenced its intent not to be bound by the subject provision due to its failure to pay the unearned premium; (4) that FIE had no reliable evidence of having produced a policy with the subject provision; (5) that FIE altered the policy information which it used to generated the policy following the loss; (6) that FIE was not entitled to reform the contract based on an oral representation when Ins. Code Section 381.2 requires that an alternate loss provision be in writing and prominently displayed; (7) that the subject provision was not included in the policy because FIE generates the jewelry floaters through its customer service center which had lost the subject form; (8) that FIE was not entitled to submit the defendant's jewelry for a replacement quote, when FIE's appraiser had no opportunity to inspect the jewelry and FIE had accepted the original appraisal and accepted premiums based upon it.

Result

The court ruled in a written statement that the defendant's testimony was unworthy of belief and was accorded no credibility by this court. The court found that Westbrook's testimony was both credible and reliable and held that the policy was fully and properly explained to the defendant at the time of formation. Furthermore, the court ruled that the defendant was in actual receipt of the policy and that its terms set forth the actual method of loss computation in compliance with the mandates of Ins. Code Section 381.2. The court also held that FIE acted in conformity with the terms of the contract of insurance in adjusting the claim on the basis of the replacement cost quote of the local jewelry replacement company. The issue of reformation was never reached by the court based upon its ruling. The defendant was to be refunded his unearned insurance premium for the balance of the coverage term. Fire Insurance Exchange's DRA was adjudicated in its favor with the court ruling that the insured did have actual receipt of the policy and its endorsements and that the jewelry floater complied with the mandates of Ins. Code Section 381.2

Other Information

Plaintiff Fire Insurance Exchange is seeking an award of $14,000 in litigation costs.