March 19, 2018

The Court of Appeals of California has ruled that a vintage wine collector who accidentally purchased counterfeit wine was not owed a payout by his insurance company to cover the losses claimed after he discovered the wine was counterfeit. The case is Doyle v. Fireman's Fund Ins. Co., No. G054197, 2018 Cal. App. LEXIS 187 (Ct. App. Mar. 7, 2018).

David Doyle is a collector of rare, vintage wine. He has a world-class wine collection that is housed in a wine storage facility in Laguna Beach. In 2007, Doyle purchased a Valuable Possessions insurance policy from Fireman's Fund Insurance Company to cover his expensive wine against loss or damage in case anything happened to the wine. The blanket policy limit was $19 million. Doyle renewed this policy eight times. During the eight years of insurance, Doyle purchased almost $18 million worth of supposedly rare, vintage wine from a man named Rudy Kurniawan. A law enforcement investigation revealed that Kurniawan had been filling empty wine bottles with his own wine blend, and putting counterfeit wine labels on the bottles. In 2013, Kurniawan was convicted of fraud and sent to prison for ten years.  

Doyle sought reimbursement from his insurance company for the losses he sustained when he discovered that the wine he had purchased was counterfeit. After an investigation, Fireman's Fund denied all coverage stating that there was no covered loss under the policy. In 2015, Doyle filed an amended complaint for breach of contract.

The insurance policy included a provision entitled "Perils Insured Against" which provided that the insurance company "insures for direct and accidental loss or damage to covered property". Doyle argued that the policy provides protection against all insurable risks, including crime-related losses to an investment, whether or not something physical happens to the wine.

Fireman's Fund argued there was no "loss or damage to covered property" because when the counterfeiting was discovered, the wine was in the exact same condition as it was when the wine was initially insured.  

The policy covered "Collectibles", including wine, and the policy provided that "We insure for direct and accidental loss or damage to covered property caused by an "occurrence". Occurrence was defined as "a loss to covered property which occurs during the policy period . . . and is caused by one or more perils we insure against."

The appellate court stated that they realize that Doyle suffered a financial loss, but noted that when Doyle made the purchase of the wine, the wine was already counterfeit, and essentially worthless, during the whole coverage period. Doyle can make a claim against Kurniawan for fraud but the court found that Doyle cannot "reasonably expect" the policy to reimburse him for making a purchase of wine that had no value at the time of purchase.

Editor's Note: Because the insurance policy stated that an occurrence is a loss to covered property that occurs during the policy period, Doyle was really out of luck the moment he made the transaction for the counterfeit wine. No loss occurred to Doyle's property during the policy period. The wine did not have the purported value at the time of the sale, but Doyle was hoodwinked and spent $18 million on worthless wine. As the court stated, Doyle can sue Kurniawan for fraudulently selling him the wine bottles, but at this point there is no legal way that Fireman's Fund will be liable for paying out this claim.