London Market - August 2010

Jewellers Block, Unexplained Loss Exclusion, Condition Precedent, Breach of Warranty

Widefree Limited (trading as Abrahams & Ballard) v Brit Insurance Limited [2009] EWHC 3671 (QB)

The claimant was a jewellery shop owned and run by a husband and wife, Mr and Mrs Abraham, which had taken out an insurance policy (the Policy”) with the defendant, dated 15 February 2008.

On 9 October 2008, two women who were behaving erratically came into the jewellery shop. Mrs Abraham showed the women some items of jewellery but they left without purchasing anything.

On 22 October 2008, Mr Abraham tried to find one of the shop’s most expensive items, a diamond ring valued at over £100,000, to show to a customer. A search of the display cabinets and safe revealed that the item was missing. Mrs Abraham thought back to the incident with the two women and concluded that they had stolen the ring.  Mr Abraham reported the missing ring to his insurance brokers and the police.

Two police officers attended the shop and watched the security footage from the incident in question. Although the shop had five CCTV security cameras in operation at the time of the incident the officers felt that the footage from only one camera was useful, although this did not clearly show the women stealing the ring. Mr Abraham arranged for this footage to be downloaded from the hard drive, onto a DVD, by the CCTV system operator Nationwide Security. All security footage on the hard drive was retained for a period of at least a week.

The defendant appointed a loss adjuster who visited the claimant on 6 November 2008. The loss adjuster’s report was later shown to contain numerous inconsistencies and inaccuracies. In a letter to the claimant, dated 21 January 2009, the defendant denied liability on the basis of the Fidelity and Unexplained Loss Exclusions in the Policy.

The defendant later accepted that there was no basis for relying on the Fidelity Exclusion but denied that they were liable to indemnify the claimant on three grounds, namely:

1. That the loss of the ring fell within the Unexplained Loss Exclusion in the Policy. This exclusion stated that any insured items which are found to be missing during stocktaking, where the Insured is unable to prove the date and circumstances of the loss will not be covered by the Policy.
   
2. That there was a breach of a General Condition of the Policy, namely a condition precedent that the Insured provide the Insurer with such information and evidence as the Insurer may reasonably require. The defendant claimed that this Condition had been breached as the claimant had not provided it with security footage taken from all five cameras.
   
3. That there was a breach of a warranty which stated that a security guard would be in attendance at all times. The security guard had in fact been outside the shop watching through the window. The defendant later abandoned this ground in their closing submissions. 

Held

Mr Peter Leaver QC, sitting as a deputy High Court Judge, held that in relation to the Unexplained Loss Exclusion the definition of stocktaking was to be given its ordinary meaning, a structured and organised process which is undertaken at regular intervals. The defendant’s argument that when looking for the missing ring Mr and Mrs Abraham could be described as stocktaking was therefore rejected. Also, it was held that on the balance of probabilities the claimant could prove the date and circumstances of the loss.

In relation to the breach of the General Condition, it was held that the loss adjuster had never asked for the footage from the other cameras and should have known that such footage was not retained indefinitely. It was not for the claimant to attempt to guess what evidence the Insurer might want to see. In light of the advice from the police officers, it was satisfactory that Mr Abraham only downloaded the footage from the one camera.

Judgment in favour of the claimant.