IN BRIEF: N.Y. jeweler not covered for fake J-Lo video mob heist

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Jennifer Lopez at the Academy Awards in 2006, wearing diamond jewelry by Fred Leighton. REUTERS/Lucy Nicholson

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(Reuters) - Lloyd’s London has no duty to compensate Crown Jewels Estate Jewelry Inc for the $2 million in merchandise it loaned to a “music-video producer” who turned out to be a member of the Gambino crime syndicate orchestrating an elaborate scam behind bars, the New York Appellate Division held Thursday.

The court affirmed that Crown triggered the “dishonest entrustment” exclusion to its jewelers block policy in 2017 when it willingly handed over the diamonds to a courier for James Sabatino, who claimed to be shooting a video for Jennifer Lopez.

Crown’s loss “resulted from theft or an act of dishonest character on the part of the persons to whom the jewelry was entrusted,” the court said in an opinion by Justices Dianne Renwick, Sallie Manzanet-Daniels, Tanya Kennedy and Martin Shulman. “It is irrelevant to whom or for what purpose the jewelry was actually or intended to be entrusted.”

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According to the opinion, Sabatino had obtained several cell phones while incarcerated in a federal prison in Miami and used them to spoof Sony email addresses and telephone numbers, and to create a website for an ersatz brokerage to issue certificates of insurance on the “borrowed” merchandise.

Other jurisdictions may question whether items given to imposters were truly “entrusted,” but in New York, “entrustment is to be determined by the state of mind of the insured rather than that of the recipient,” the court held. “The plain language of the dishonest entrustment exclusion … confirms that the exclusion applies to the present case.”

The case is Crown Jewels Estate Jewelry Inc v. Underwriters at Interest at Lloyd's London, New York Appellate Division, First Department, No. 2020-04312 (Index 655939/17, Appeal No. 13833)

For Crown Jewels: Ira Lipsius of Lipsius-BenHaim Law

For Lloyd’s Underwriters: Dennis Wade of Wade Clark Mulcahy

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