Filed 3/7/18




                            CERTIFIED FOR PUBLICATION

               IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             FOURTH APPELLATE DISTRICT

                                     DIVISION THREE



DAVID DOYLE,

    Plaintiff and Appellant,                        G054197

        v.                                          (Super. Ct. No. 30-2015-00767635)

FIREMAN’S FUND INSURANCE                            OPINION
COMPANY,

    Defendant and Respondent.



                 Appeal from a judgment of the Superior Court of Orange County, Thierry
Patrick Colaw, Judge. Affirmed.
                 Abelson Herron Halpern, Marc D. Halpern and Douglas J. Brown for
Plaintiff and Appellant.
                 Sheppard, Mullin, Richter & Hampton, Marc J. Feldman and Karin Dougan
Vogel for Defendant and Respondent.
                                *            *             *
              “O thou invisible spirit of wine, if thou hast no name to be known by, let us
call thee devil!” (Shakespeare, Othello, act II, scene 3.)
              Yea verily, we are presented with a most unfortunate tale of a villainous
wine dealer who sold millions of dollars’ worth of counterfeit wine to an unsuspecting
wine collector. When the wine collector discovered the fraud, he filed an insurance claim
based on his “Valuable Possessions” property insurance policy. The insurance company
denied the claim. The wine collector sued for breach of contract. The trial court ruled in
favor of the insurance company, sustaining its demurrer.
              We agreeth with the trial court; the wine collector suffered a financial loss,
but there was no loss to property that was covered by the property insurance policy. In
other words, the wine collector is stuck with the devil wine without recompense. A
Shakespearean tragedy, to be sure.


                                              I
                     FACTS AND PROCEDURAL BACKGROUND
              David Doyle is a collector of rare, vintage wine. His “world-class” wine
collection is housed in a wine storage facility in Laguna Beach. Starting in 2007, Doyle
insured his wine collection against loss or damage by purchasing a “Valuable
Possessions” policy from Fireman’s Fund Insurance Company (Fireman’s Fund), with a
blanket policy limit of $19 million. Doyle went on to purchase eight annual renewal
policies.1
              During the eight years that Doyle was insured under the policy, he
purchased close to $18 million of purportedly rare, vintage wine from Rudy Kurniawan.
But a law enforcement investigation revealed that for many years Kurniawan had
apparently been filling empty wine bottles with his own wine blend and had been affixing

1The language in each policy essentially remained the same; for the sake of clarity, we
will refer to the “policy” in the singular form throughout this opinion.

                                              2
counterfeit labels to the bottles. In 2013, Kurniawan was convicted of fraud and was sent
to prison for 10 years.
              In 2014, Doyle filed a claim seeking reimbursement from Fireman’s Fund
“for the losses he sustained” due to Kurniawan’s fraud. After gathering documentation
and conducting an investigation, Fireman’s Fund denied all coverage stating there was no
covered “loss” under the policy.
              In 2015, Doyle filed a first amended complaint alleging breach of contract,
among other causes of action. As relevant here, Fireman’s Fund filed a demurrer, which
the trial court sustained without leave to amend.2 Doyle appeals.


                                             II
                                       DISCUSSION
              The “PERILS INSURED AGAINST” provision of the Firearm’s Fund
insurance policy Doyle purchased provides: “We insure for direct and accidental loss or
damage to covered property . . . .” (Italics added.)
              In this appeal, Doyle argues that the policy provides “broad protection
against all insurable risks, which include crime-related losses to [his] investment whether
anything physical happened to the wine or not.” (Italics omitted.) Conversely, Firearm’s
Fund argues that no “loss or damage to covered property” occurred; that is, “the wine is
in the exact same condition now that it was in when [Doyle] first insured it.”
              Based on the nature of property insurance and the plain language of the
policy, we agree with Fireman’s Fund; Doyle indeed suffered a financial loss, but there
was no loss to his covered property.




2The parties settled a related claim regarding “a mutual mistake of fact as to the value of
what was being insured, and a corresponding overpayment of premiums . . . .”

                                             3
A. Standard of Review
              In an appeal from a judgment on a demurrer without leave to amend, we
“accept as true the facts as alleged in the complaint construed in favor of the pleader, and
determine whether those allegations state a cause of action.” (Fremont Comp. Ins. Co. v.
Sierra Pine (2004) 121 Cal.App.4th 389, 393.)
              “‘In general, interpretation of an insurance policy is a question of law and is
reviewed de novo under settled rules of contract interpretation.’” (Hovannisian v. First
American Title Ins. Co. (2017) 14 Cal.App.5th 420, 430.) Fundamentally, we construe a
contract “to give effect to the mutual intention of the parties” at the time of its formation.
(Civ. Code, § 1636.) We infer the parties’ intent, if possible, solely from the written
provisions of the contract. (Civ. Code, § 1639.) We interpret these provisions, “in their
ordinary and popular sense, . . . unless used by the parties in a technical sense, or unless a
special meaning is given to them by usage.” (Civ. Code, § 1644.)
              “An insurance policy provision is ambiguous when it is capable of two or
more constructions, both of which are reasonable. [Citation.]” (Jordan v. Allstate Ins.
Co. (2004) 116 Cal.App.4th 1206, 1214.) “[A]lthough parol evidence ‘may be
admissible to determine whether the terms of a contract are ambiguous [citation], it is not
admissible if it contradicts a clear and explicit policy provision [citation].’” (George v.
Automobile Club of Southern California. (2011) 201 Cal.App.4th 1112, 1121.)


B. The Valuable Possessions Insurance Policy
              The Fireman’s Fund insurance policy at issue in this case is a preprinted
“Scheduled Valuable Possessions Policy,” which covers various items of valuable
personal property such as jewelry, furs, and fine art. The policy also covers:
“‘Collectibles’, meaning wine, sports cards, dolls, model trains, and other private
collections of rare, unique or novel items of personal interest including memorabilia.”
The “PERILS INSURED AGAINST” provision of the policy provides: “We insure for

                                              4
direct and accidental loss or damage to covered property caused by an ‘occurrence.’”
The policy defines an “‘occurrence’” as “a loss to covered property which occurs during
the policy period . . . and is caused by one or more perils we insure against.” The policy
does not define the term “loss.”
              The “EXCLUSIONS – LOSS NOT INSURED,” portion of the policy lists
various exclusions such as, “Wear and tear, gradual deterioration, latent defect or
inherent vice[.]” The policy also provides that: “If wine is covered . . . , the following
exclusions also apply: [¶] a. Failure to use reasonable care to maintain all heating,
cooling or humidity control equipment in proper operating condition. . . ; [¶] b. Improper
handling or storage; [¶] c. Consumption; or [¶] d. Normal shortage, leakage, spillage,
evaporation, dissipation, spoilage or deterioration, all usual and customary to wine.”


C. Legal Analysis
              “Property insurance is a type of insurance with its own historical
development, and which is now available to cover ‘just about any type of property that
exists in the modern world.’ [Citation.] [¶] The self-evident point is that property
insurance is insurance of property. While in the modern setting ‘just about any type of
property’ may be insured, the insured item must nonetheless be property.” (Simon
Marketing, Inc. v. Gulf Ins. Co. (2007) 149 Cal.App.4th 616, 622-623, fn. omitted.)
              “Given this premise, the threshold requirement for recovery under a
contract of property insurance is that the insured property has sustained physical loss or
damage. [Citation.] ‘The requirement that the loss be “physical,” given the ordinary
definition of that term is widely held to exclude alleged losses that are intangible or
incorporeal, and, thereby, to preclude any claim against the property insurer where the
insured merely suffers a detrimental economic impact unaccompanied by a distinct,
demonstrable, physical alteration of the property.’” (Simon Marketing v. Gulf Ins. Co.,
supra, 149 Cal.App.4th at pp. 622-623.)

                                              5
              Here, Doyle has not pleaded a breach of contract claim that can be proven
at trial because nothing happened to the covered property (i.e., the wine that Doyle
purchased and insured). That is, the plain language of the “PERILS INSURED
AGAINST” provision makes it clear that Fireman’s Fund was insuring against “direct
and accidental loss . . . to covered property[.]” The word “loss” modifies the subject
phrase “covered property” by way of the preposition “to.” Fireman’s Fund was insuring
against any losses to the wine; Fireman’s Fund was not insuring against any losses to
Doyle’s finances or to his unrealized expectations as to the value of the wine he had
purchased. (See California Fair Plan Assn. v. Garnes (2017) 11 Cal.App.5th 1276,
1288-1289 [the phrase “total loss to a structure” in a fire insurance statute “unmistakably
contemplates a quantum of physical damage . . . and excludes the sort of economic
analysis employed by” the plaintiff].)
              When Doyle purchased the wine from Kurniawan it was counterfeit. The
wine remained counterfeit (and essentially worthless) throughout the entire coverage
period of the policy. Perhaps Doyle has a valid claim against Kurniawan for fraud.
However, Doyle cannot reasonably expect his Fireman’s Fund “Valuable Possessions”
property insurance policy to reimburse him for his multiple purchases of wine from
Kurniawan, which was essentially valueless at the time of purchase.
              Indeed, when it comes to property insurance, diminution in value is not a
covered peril, it is a measure of a loss. (State Farm Fire and Casualty Co. v. Superior
Court (1989) 215 Cal.App.3d 1435, 1444 (State Farm).) In State Farm, a homeowner’s
association (HOA) had purchased insurance to cover its condominium complex. The
HOA filed a claim when it discovered latent deficiencies “allegedly due to building code
violations, faulty workmanship and fraud by the builder[,]” even though “the policy
specifically excluded recovery for latent defects, faulty workmanship and construction
code violations.” (Id. at p. 1439.) After the insurance company predictably denied the
claim, the HOA sued, arguing that “the actual loss was the ‘diminished value of the

                                             6
building’ which was a nonexcluded ensuing loss.” (Ibid.) The appellate court disagreed.
“‘Diminution in market value’ is not a ‘peril’ at all; it is a method of measuring
damages.” (Id. at p. 1444.)
              Here, similar to State Farm, Doyle suffered a diminution in value—he lost
the money he had invested in his wine collection—because of the fraud committed by
Kurniawan. But Doyle’s financial loss was not a covered peril, it is simply a measure of
his damages. Doyle contends that unlike the property insurance policy in State Farm, the
Fireman’s Fund property insurance policy does not limit itself to physical damages. But
given the fundamental nature of property insurance, the policy Doyle purchased only
insured him against potential harms to the wine itself, such as fire, theft, or abnormal
spoilage; Doyle did not insure himself against any potential financial losses. Doyle did
not buy a provenance insurance policy; Doyle bought a property insurance policy.
              Doyle argues that the policy he purchased does not list fraud as an
exclusion; therefore, he contends that the fraud committed by Kurniawan is covered
under the policy. The problem with this argument is that: “The burden is on the insured
to establish that the occurrence forming the basis of its claim is within the basic scope of
insurance coverage. [Citations.] And, once an insured has made this showing, the
burden is on the insurer to prove the claim is specifically excluded.” (Aydin Corp. v.
First State Ins. Co. (1998) 18 Cal.4th 1183, 1188.) Here, Doyle has failed to establish
that any type of financial loss, including fraud, comes within the scope of the property
insurance policy he purchased. That the policy does not specifically list fraud as an
exclusion is irrelevant.
              Moreover, we are making our decision based on the clear and explicit
language in the covered perils provision of the insurance policy; that is, we do not find
the contract terms to be ambiguous. Thus, we do not consider Doyle’s expectations at the
time of contracting based on extrinsic parol evidence (e.g., Fireman’s Fund’s marketing
materials, Doyle’s homeowner’s policy, etc.). (See Elliott v. Geico Indemnity Co. (2014)

                                              7
231 Cal.App.4th 789, 801-802 [“‘Although parol evidence may be admissible to
determine whether the terms of a contract are ambiguous [citation], it is not admissible if
it contradicts a clear and explicit policy provision’”].)
              Finally, we can merely offereth to Doyle this small piece of wisdom from
the Bard of Avon: “The robbed that smiles steals something from the thief.”
(Shakespeare, Othello, act I, scene 3.)


                                              III
                                       DISPOSITION
              The judgment is affirmed. Costs on appeal are awarded to Respondent.




                                                    MOORE, J.

WE CONCUR:



O’LEARY, P. J.



FYBEL, J.




                                               8
