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A small claims court in California has ruled that a renter's insurance policy covered the theft of prenuptial gifts the insured made to his fiancée, finding that he had an insurable conditional ownership interest in the gifts under California Civil Code § 1590.

The Case

In or around September 2017, Anh Kiet Chung told his Allstate Insurance Company of California insurance agent that he had purchased a diamond engagement ring for his fiancée, who lived in Vietnam, and asked if he could add this ring to his renter's insurance policy.

The agent checked with Allstate, which instructed the agent that the ring could be added to the policy, that the ring would be covered anywhere in the world, but that the fiancée could not be added to the policy.

Mr. Chung thereafter added the ring to his policy and presented the ring to his fiancée when he proposed later that year. The proposal was accepted by his fiancée.

In or around February 14, 2018, Mr. Chung purchased a diamond pendant as a Valentine's Day present for his fiancée. He had this item added to his insurance policy as of February 14, 2018.

Mr. Chung then travelled to Vietnam and presented this gift to his fiancée.

In or around June 2018, Mr. Chung purchased a second diamond pendant and a diamond bracelet as gifts to be given to his fiancée. He emailed the Allstate insurance agent to have these items added to his policy. Mr. Chung did not expressly indicate that these items were gifts for his fiancée, but they were identified as ladies' jewelry in the description, and the agent referenced the prior jewelry items that had been added in explaining that the two new items would be added "similar to how we had completed it before."

The Allstate insurance agent who added the jewelry items to Mr. Chung's policy knew that neither Mr. Chung's fiancée nor any other third party was listed on Mr. Chung's policy. Nevertheless, the agent apparently never told Mr. Chung that if he were to make an unconditional gift of these items to his fiancée, they would no longer be covered by his insurance policy.

Mr. Chung was under impression that the jewelry would be covered regardless of whether he made a gift of these items to his fiancée.

In June 2018, Mr. Chung went on an overseas trip to Thailand with his fiancée. While on this trip, and allegedly before Mr. Chung had gifted the last two items to his fiancée, all four items of jewelry (the engagement ring, the Valentine's Day pendant, the second pendant, and the bracelet) were stolen at the airport from a checked bag belonging to Mr. Chung, probably during inspection by local airport personnel.

Mr. Chung submitted a claim to Allstate for the loss of all four items.

Allstate agreed to cover the loss of the engagement ring but not the loss of the other three items of jewelry, which remaining items were insured for a total of $3,466 ($2,688 for the Valentine's Day pendant, $225 for the second pendant, and $553 for the bracelet).

Allstate reasoned that an engagement ring was by nature a conditional gift that only was given to the fiancée on the condition of marriage, and thus Mr. Chung maintained an ownership interest in the engagement ring at the time of the loss.

Allstate also reasoned, however, that the other three items of jewelry were unconditional gifts in which Mr. Chung had surrendered any ownership interest prior to the loss.

Mr. Chung sued Allstate in small claims court, maintaining that all four items were intended to be prenuptial gifts made only because he and his fiancée were engaged and that he maintained an ownership interest in them at all times. He also maintained that he had an ownership interest in the items at the time of the loss because the items were in his bag and his possession at the time of loss. He further maintained that the last two items had not yet been surrendered as gifts to his fiancée and thus still were owned by him at the time of the loss.

Allstate argued that there was no coverage because the jewelry had been stolen after it had been unconditionally gifted to Mr. Chung's fiancée, and its policy only covered items in which Mr. Chung had an ownership interest at the time of the loss.

The Small Claims Court's Decision

The court granted judgment in favor of Mr. Chung.

In its decision, the court explained that if Mr. Chung had gifted the jewelry to someone other than his fiancée, Allstate's denial of coverage probably would be correct because the Allstate policy only covered scheduled items to the extent Mr. Chung had an ownership interest in those items.

The court then observed that this case was "unique" because Mr. Chung was not seeking to recover for the loss of just any gifts but, rather, that he was seeking to recover for the loss of prenuptial, post-engagement gifts made only on the basis or assumption that he and his fiancée were getting married.

The court then ruled that Mr. Chung had an ownership interest in the prenuptial gifts to his fiancée. It reasoned that California law provided that "[w]here either party to a contemplated marriage in this State makes a gift of money or property to the other on the basis or assumption that the marriage will take place, in the event that the donee refuses to enter into the marriage as contemplated or that it is given up by mutual consent, the donor may recover such gift or such part of its value as may, under all of the circumstances of the case, be found by a court or jury to be just." Cal. Civil Code § 1590. By its express terms, the court continued, the statute was not limited to engagement rings or other engagement gifts, but included any "gift of money or property" made "on the basis or assumption that the marriage will take place."

The court then ruled that the record supported Mr. Chung's position that all of the gifts at issue were made on the assumption that he and his fiancée would be married and that Mr. Chung maintained an ownership interest in the gifts at the time of loss. The court reasoned that:

• All of the gifts were made well-after Mr. Chung was engaged to his fiancée;
• Mr. Chung had not given any such gifts to his fiancée prior to her acceptance of his marriage proposal;
• Expensive jewelry, especially the $2,688 diamond pendant, was not the type of gift typically given without an assumption of an enduring relationship;
• The last two gifts were purchased with the intent to make amends for an argument and to ensure and maintain the engagement;
• Mr. Chung continued to treat the gifts as his own personal property by packing them in his own bag for safekeeping during his travels with his fiancée; and
• Perhaps most significant, Mr. Chung paid to have the gifts insured by Allstate, demonstrating that he viewed any loss of the gifts as a loss to himself, "as reasonable people [did] not typically pay to insure gifts given unconditionally to another."

The court pointed out that Mr. Chung testified at trial that each of the items of jewelry at issue was a conditional gift in the sense that both he and his fiancée understood that Mr. Chung could demand their return from his fiancée at any time and that the fiancée would return all of these gifts if the engagement were broken off. The court also noted that Mr. Chung had asked for and received back these items on more than one occasion for alterations and for safekeeping, and that Mr. Chung also had testified that all of the items of jewelry had been returned to him for safekeeping at the time they were stolen.

In light of all of these facts, the court concluded, Mr. Chung maintained an ownership interest under Section 1590 and as conditional gifts in all of the stolen jewelry items at the time of the loss. These items therefore were covered by his policy, and Allstate was liable for the $3,466 loss.

The case is Chung v. Allstate Ins. Co., No.: 19-SCS-00915 (Cal. Super. Ct. Sept. 17, 2019).

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Mr. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He may be contacted at smeyerowitz@meyerowitzcommunications.com.