Last updateWed, 25 Mar 2020 1pm

The Best Policy: The watch shop burglary

The customer walked into Jim Cellar's Fine Jewelry with a watch that had not run in years. The bracelet was missing and the brand name was indistinguishable. The customer said that he would just like an estimate on what it would take to get it running again. Jim took the watch in without a discussion about the value except that the customer mentioned that it had belonged to a deceased relative.

Jim outsourced his watch work to I. Ken Fixit, who had a small shop across town that did nothing but watch repair, and so that's where he sent this customer's watch.

A few days later, Jim called the customer with the estimate, and the customer said he was undecided as to whether the old watch was really worth repairing, so he said he would think about it and let Jim know whether to proceed. In the meantime, the watch remained in Ken's fire safe.
Eventually the decision was made to clean and repair the watch, so Jim called Ken to give him the go-ahead.

"Well, uh, there's been a little problem, Jim."

Burglars had decided that Ken's watch shop would be a good target. They easily compromised his very basic alarm system and then had far more time than they needed to break into the old fire safe - it took them less than 2 minutes.

"That's terrible news, Ken; I guess you've turned this over to your insurance carrier."

"Well, that's another problem, Jim. My insurance is just for my tools and equipment, like for a fire, you know. It doesn't cover jewelry or watches. I just never thought that a watch shop needed to have a Jewelers Block policy."

Jim then had the unpleasant task of informing the customer that the watch had been stolen in a burglary at the repair shop, and that the shop had no insurance coverage for the loss. Thankfully, Jim knew that the watch was not of much real value.

The customer was irate. The rusty old watch which previously may not have been worth repairing suddenly had great value! According to the customer, though he did not know the brand he knew that it was surely crafted of solid gold and maybe even a "collector's item" because of a logo that was on the face. Also it was then a "priceless family heirloom," believed to have been given to an ancestor by the Queen of England.

"Why would you send my priceless watch off to someone who would lose it in a burglary! And so now it's gone forever and I want to know what you're going to do about it!"

With only a vague description of the watch on the take-in order and no value stated, Jim had nothing with which to dispute the customer's wild and escalating claims. This was a problem which was destined to consume a great deal of time and energy, and an indeterminable amount of money.

Did the customer have insurance? It would have to have been insured as "scheduled" property and Jim was certain that was not the case. Even if the customer had had personal insurance on the item, that carrier would likely seek recovery from Jim.

Jim looked to his own insurance policy for coverage - he did have a Jeweler's Block policy which insured watches as well as gemstones and other forms of jewelry; and it did cover customers' property in his care. But this loss was about an item that was not in his care.

The good news:
Jim read further. He read an option in the policy for "property in the custody of jewelry dealers . . . "and a limit of coverage was shown." He called his agent; was the watch repair shop a "jewelry dealer" under this definition? Did his policy provide coverage for his loss from the burglary at I. Ken Fixit?

The loss was turned in to the carrier, and it was determined that coverage did apply to Jim's situation; an insurance adjuster would be assigned to work out the details with the customer. With the limited information on take-in, the adjuster may also have difficulty in reaching agreement with the customer and will likely end up authorizing more than the watch was actually worth. Regardless of that, his insurance company's intervention allowed Jim to step out of the fray and turn the irate customer over to a professional - as long as the settlement was within his limit of coverage.

Tip No. 1 Jewelers Block is the insurance staple of the jewelry industry. Every jeweler who has inventory, memo goods, or customers' property should carry that type of insurance. And if property is sent to another jeweler for any reason, such as for repair, design work, appraisal, or on memo the policy should include other jeweler coverage with an adequate limit of insurance. (It may not be automatically included!)

Tip No. 2 When accepting customers' property, describe the item(s) and request the customer's estimate of value. It may be necessary to explain to a customer that the purpose of insurance is to replace an item with "like kind and quality" and that because of that, only the intrinsic value is insurable. Unfortunately there is no way to replace an item's sentimental value.

You may still receive an inflated value from a customer, but that often is better than no value at all.

Also be sure that the job envelop is not the only record. If the envelope is the only record and it remains with the item, then you would still have no information if both are lost or stolen. Consider job envelops that make double copies of all the information - original as a claim check for the customer, first copy separately filed, second copy remains with the piece.

Tip No. 3 Property that a retail jeweler sends to a shop often belongs to the retailer's customers. Does the shop have good security? Does the shop carry insurance - specifically Jewelers Block insurance? Since Jim regularly used the same shop, Jim could have requested a Certificate of Insurance - Ken's agent would have provided it.

And if this shop had had insurance, it might have had better security.

Tip No. 4 Check the deductible. Company A's policy states that the deductible is subtracted from the limit of coverage; Company B's deductible is taken from the amount of the loss. Same thing? Not always. Consider $10,000 limit on other jeweler coverage; $1,000 deductible. A jeweler suffers a loss that is greater than his limit, say, $15,000. Company A will pay $9,000 ($10,000 limit less $1,000 deductible). Company B pays $10,000 ($15,000 minus $1,000 = $14,000, so the policy pays its full limit of $10,000).

It may appear to be a minor distinction, but it can be major in some circumstances.

It pays to look at the details of your insurance coverage. Had Jim not had the optional coverage for property in the care of another jeweler, he would have been on his own in an embarrassing and difficult to handle situation - which may even have led to litigation. His insurance protected him not only financially, but emotionally. And always deal with a reliable jewelry insurance company and an experienced agent you can trust.

Bob Carroll of Robert G. Carroll and Associates is a Certified Insurance Counselor who has specialized in working with the jewelry industry from more than 25 years - representing Jewelers Mutual and other quality carriers in Arkansas, Oklahoma, Mississippi, and Tennessee. "Jewelry insurance isn't just what we do, it's all we do!" [www.robertgcarroll.com]