If you are a collector of wine, you likely have heard of Rudy Kurniawan. Kurniawan came to prominence as a wine connoisseur and collector in the early 2000’s. He began purchasing and selling large lots of wine at auction houses, and at one auction, Kurniawan is reported to have sold $24.7 million dollars of wine. Discrepancies started to become noticed in the market place and ultimately it was determined that Kurniawan was running a counterfeiting workshop with corking tools, labels, and bottles. In essence, Kurniawan was utilizing less expensive wine to create the purportedly rare, valuable wines. In 2012, Kurniawan was arrested by the FBI and is currently serving a 10-year sentence for fraud.

Unfortunately, David Doyle was one of the unsuspecting purchasers of Kurniawan’s fraudulent wine. Doyle, a collector of rare, vintage wine, insured his wine collection with Fireman’s Fund under a “Valuable Possessions” policy, with a blanket limit of $19 million. Over the course of eight years, while insured with Fireman’s Fund, Doyle purchased $18 million of purportedly rare, vintage wine from Kurniawan. Following his conviction, Doyle filed a claim with Fireman’s Fund for the loss sustained to his collection as a result of Kurniawan’s fraud.

In a recent opinion by the California Court of Appeals, Doyle v. Fireman’s Fund Insurance Company,1 the court upheld trial court’s ruling that the insured’s financial loss from the purchase of the fraudulent wine was not covered. The Valuable Possessions policy provided coverage, like most property policies, for “direct and accidental loss or damage to covered property.” It was undisputed that the wine was “covered property.” The court noted, however, that the threshold requirement for recovery under the contract was that the insured property must sustain physical loss or damage.”

The court concluded that the claim could not be sustained as Doyle had alleged economic losses, not a physical loss to the wine. The court specifically noted that Fireman’s Fund had insured against losses to the wine, not to Doyle’s finances or to his unrealized expectations as to the value of the wine purchased. The court went on to state that the fundamental nature of the property insurance purchased was to ensure against potential harm to the wine itself, such as fire, theft or abnormal spoilage, not potential financial losses. Unfortunately for Doyle, when he purchased the wine from Kurniawan it was counterfeit and it remained counterfeit throughout the entire time it was insured. As such, there was no physical loss to the wine.

As a side note, if you are interested in this topic, I recommend watching the 2016 documentary, Sour Grapes.
1 Doyle v. Fireman’s Fund Ins. Co., 229 Cal.Rptr.3d 840 (2018).