Ms. Fogel said that she wanted at least $17,000 for the diamond. She said that Mr. Dubois told her that he might have a buyer for it, with or without the setting. Ms. Fogel said that she gave Mr. Dubois the diamond to sell on consignment. In return, she said, he provided her with a $17,000 check as a “marker,” but instructed her not to cash the check.

According to Ms. Fogel, Mr. Dubois was not able to sell the diamond immediately and, a week or two later, he returned the diamond's setting to her while continuing to try to sell the diamond. She asserted that, when the diamond failed to sell in a few months, he offered to return it to her but that she told him to continue with his efforts. At one point, Ms. Fogel apparently tried to cash the check that had been given to her as a “marker” but she was unable to negotiate it.

In the meantime, Ms. Fogel said that she engaged in other business transactions with Mr. Dubois. First, he loaned her approximately $3,000 in cash. No arrangements were made for repayment of the loan, but Ms. Fogel said that she assumed that “[f]uture business dealings would take care of” the debt.

Second, Ms. Fogel said that Mr. Dubois agreed to provide her with cash to redeem jewelry she had pawned with King's Jewelry and Loan. The agreement apparently presumed that Ms. Fogel would compensate Mr. Dubois by allowing him to keep some of the redeemed jewelry. Using Mr. Dubois' money, she redeemed 48 pieces of jewelry from King's. Ms. Fogel said that she permitted Mr. Dubois to keep a gold watch, a gold bracelet, a charm bracelet, three rings, and a topaz bracelet. Apparently, neither Ms. Fogel nor Mr. Dubois maintained records of the value of the redeemed jewelry or of the jewelry Mr. Dubois retained.

According to King's receipts, the 48 pieces of jewelry had been redeemed for $8,686, and the weight of the gold for those pieces totaled 342.8 grams. Based on an agreed-upon price of $20 per gram, the value of the redeemed gold was $6,856. Without taking into account the jewelry Ms. Fogel kept, the redemption receipts showed that Mr. Dubois paid more to redeem the jewelry than its actual value. This led Mr. Dubois to claim he was owed additional funds. Despite their disagreement over this fact, Ms. Fogel said that she believed she and Mr. Dubois would work it out.

Next, Ms. Fogel said that she provided Mr. Dubois with a statue to sell on consignment. Mr. Dubois sold the statue. Ms. Fogel claimed that Mr. Dubois did not pay her for the statue, although he claimed that he did.

Finally, Ms. Fogel said that she and Mr. Dubois met to discuss Ms. Fogel's purported indebtedness to Mr. Dubois. Mr. Dubois said he would return the diamond if Ms. Fogel executed a note acknowledging that she owed him money. Mr. Dubois claimed that Ms. Fogel owed him between $5,000 and $7,000. Ms. Fogel refused to sign a note. She did not believe she owed Mr. Dubois any money, but she understood that Mr. Dubois was holding the diamond as security for the alleged debt. She also believed an accounting was necessary to determine if she owed him money.

Ms. Fogel subsequently reported the diamond's loss to the police. Based on the facts she supplied, the police told her it was a “civil matter.”

Rather than suing Mr. Dubois, Ms. Fogel submitted a claim to her insurer, State Farm General Insurance Company, for the alleged “theft” of the diamond and the other personal property she had voluntarily given to Mr. Dubois as part of their ongoing business dealings.

Specifically, Ms. Fogel made two insurance claims. One claim was submitted under a personal articles policy for the purported theft of the diamond. Her second claim was submitted under a homeowner's insurance policy that State Farm had issued to Ms. Fogel for the claimed theft of a statue, a gold watch, a gold bracelet, a charm bracelet, three rings, and a topaz bracelet.

State Farm denied both claims, concluding there had been no accidental direct physical loss of the diamond as required by the personal articles policy. State Farm based this conclusion on Ms. Fogel's admitted voluntary parting with the diamond consistent with her business history with Mr. Dubois.

Similarly, State Farm concluded under the homeowner's policy that there had been no accidental direct physical loss of covered property. Because Ms. Fogel had given the personal property to Mr. Dubois as part of her transactions with him, State Farm determined that his retention of the items had not constituted theft.

Ms. Fogel sued State Farm for breach of contract, and State Farm moved for summary judgment.

The trial court granted the motion, and Ms. Fogel appealed.

The State Farm Policies

State Farm's personal articles policy stated:

We insure for accidental direct physical loss or damage to the property covered….

(Emphasis added.)

State Farm's homeowner's insurance policy:

insure[d] for accidental direct physical loss to property”

caused by:

[t]heft, including attempted theft and loss of property from a known location when it is probable that the property has been stolen.

(Emphasis added.)

The Appellate Court's Decision

The appellate court affirmed, concluding that Ms. Fogel's alleged property loss had not been “accidental.”

In its decision, the appellate court explained that the insuring clauses of both the personal articles and homeowner's policies required an “accidental direct physical loss.” This was a “fundamental precondition to coverage” under both policies, the appellate court added.

It noted that the term accidental in an insurance policy ordinarily meant “unintended and unexpected” by the insured.

Here, the appellate court found, the evidence established that the loss of the diamond and other items of personal property had not been “accidental” within the meaning of the policies, but rather had been the result of a deliberate and intentional act by Ms. Fogel. She had “voluntarily” given the items, which included the diamond, statue, and other assorted jewelry, to Mr. Dubois as part of their ongoing business dealings. “She gave him the diamond and statue to sell and provided the other jewelry to compensate him, at least in part, for paying approximately $8,686 to redeem the 48 pieces of jewelry from King's pawn shop,” the appellate court pointed out.

Mr. Dubois had lawfully obtained possession of the diamond and other items because Ms. Fogel had voluntarily given them to him in connection with their various, ongoing business dealings, according to the appellate court.

It concluded by observing that disputes “frequently arise between parties” when goods were bought and sold or money was loaned, and that this was a “foreseeable risk” to Ms. Fogel when she undertook these business transactions. She had not demonstrated that the policies insured against such risks, the appellate court concluded.

The case is Fogel v. State Farm General Ins. Co., No. B268218 (Cal. Ct.App. Oct. 18, 2016). Attorneys involved include: Dorenfeld Law, Inc., David K. Dorenfeld and Michael W. Brown, for Plaintiff and Appellant; LHB Pacific Law Partners LLP, Matthew F. Batezel and Anne M. Master, for Defendant and Respondent.