Insurance Company Wins Appeal After Mob Defrauds Manhattan Jeweler of $2.09M in Jewelry

Gold jewelry diamond shop with rings and necklaces luxury retail store window display showcase

On May 13, 2021, a New York State Court of Appeals affirmed a lower court decision granting summary Jagainst a Manhattan jeweler, Crown Jewels Estate Jewelry, Inc. (“Crown Jewels”), in a suit for breach of contract. Crown Jewels sued its insurer, Lloyd’s of London (“Lloyd’s”) because Lloyd denied Crown Jewels’ insurance claim after Crown Jewels were defrauded by an organized crime family member in New York.

In March 2017, Crown Jewels were contacted by a Paul Castellana (“Castellana”), who claimed to be a Sony Pictures International employee and wanted to borrow some jewelry to be used in a Jennifer Lopez music video in Miami that month. After Castellana provided a certificate of insurance and contact information for someone who confirmed the authenticity of the certificate and vouched for Castellana, Crown Jewels agreed to lend him five pieces of jewelry worth a total of $2.09 million.

When the jewelry was not returned the following week, Crown Jewels contacted the authorities. It was later discovered that “Paul Castellana” was an alias for James Sabatino (“Sabatino”), “a member of the Gambino Organized Crime Family of La Cosa Nostra.” Sabatino later pleaded guilty to conspiracy to violate the RICO act and was sentenced to 20 years in prison. However, the jewelry was never recovered.

Lloyd’s denied Crown Jewels’ insurance claim, relying on the “dishonest entrustment exclusion” in the insurance contract. The “dishonest entrustment exclusion” excluded expenses or loss stemming from “sabotage, theft, conversion” or other dishonest act by the person responsible for the insured goods. The Court of Appeals agreed with the lower court ruling that this situation fell under the “dishonest entrustment exclusion” and affirmed the decision in favor of Lloyd’s.

Crown Jewels are represented by Ira S. Lipsius of Lipsius-Benhaim Law LLP.

Lloyd’s is represented by Dennis M. Wade of Wade Clark Mulcahy LLP.

The case is Crown Jewels Estate Jewelry, Inc., Doing Business as Stephen Russell v. The Underwriters at Interest at Lloyd’s London, case number 13833, in the Supreme Court of New York Appellate Division’s First Judicial Department.

* Lowe & Associates (“The Firm”) is an entertainment and business law firm located in Beverly Hills, California. The Firm has extensive experience handling cases involving breach of contract and fraud, having provided top-quality legal services to its clients since 1991. The Firm is recognized for its many achievements, including successfully litigating many high-profile cases.

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