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Sherwood Products, Inc. v. Connecticut Indemnity Co.

December 30, 2002

SHERWOOD PRODUCTS, INC., PAUL CHU AND THERESA CHU, PLAINTIFFS-RESPONDENTS/ CROSS-APPELLANTS,
v.
CONNECTICUT INDEMNITY COMPANY AND CONNECTICUT SPECIALTY INSURANCE COMPANY, DEFENDANTS-APPELLANTS/ CROSS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3193-99.

Before Judges Skillman, Cuff and Winkelstein.

The opinion of the court was delivered by: Skillman, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 3, 2002

This is an appeal by defendants Connecticut Indemnity Company and Connecticut Specialty Insurance Company *fn1 from a final judgment in favor of plaintiffs for $22,000 plus $3,612 in prejudgment interest on a claim under a "Jewelers Block" insurance policy.

Plaintiffs Paul and Theresa Chu own and operate Sherwood Products, Inc. (Sherwood), a jewelry company that does most of its sales at trade shows. In May 1994 plaintiffs submitted an application for insurance coverage on their inventory through a broker. The application form included questions concerning the applicant's bookkeeping practices, which the Chus answered as follows:

6. BOOKKEEPING

a. Do you keep a detailed and itemized inventory of your stock? YES

b. Do you keep a record of purchases and sales? YES

c. Do you maintain detailed records of the property of others in your care, custody or control? YES

d. How often do you take a physical stock inventory? YEARLY Based on the information contained in plaintiffs' application, defendants issued a Jewelers Block policy to Sherwood. Endorsement #2 of the policy specifically provided for off premises coverage at trade shows.

The policy issued to plaintiffs included a section which required them to maintain specified records of their inventory, purchases and sales, and any merchandise taken from its premises to another location:

c. RECORDS AND INVENTORY

You will keep accurate records of your business and retain them for three years after the policy ends.

These records will consist of: (1) An itemized inventory of all your stock in trade;

(2) Records of all purchases and sales whether cash or credit; (3) Records of the property of others in your care, custody or control; (4) A detailed listing of travelers stock; and (5) Records of all other property away from your premises.

You will also take a physical inventory of all your stock in trade at least every 12 months.

On May 4, 1997, the Chus and two other Sherwood employees went to a four-day trade show in Atlantic City. They brought approximately 600 pieces of jewelry, which had an aggregate value of $250,000 to $300,000, with them. They carried most of the jewelry in a Samsonite case. However, Mrs. Chu also carried some "special items" in a brown handbag. When the Chus set up ...


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