March 2022


Robbery victim wins against insurer

by Resolve Editor Kate Tilley

A Sydney retail jewellery store that lost stock in a robbery has succeeded in an action against its insurer.

In a supplementary case, Diamond World Jewellers also succeeded in having costs awarded against Catlin Australia, including indemnity costs from 18 August 2021, before the October trial began.

Diamond World was awarded more than $1.4 million for the stolen and damaged stock.

NSW Supreme Court Acting Justice Monika Schmidt, in her initial November 2021 judgement, said Diamond World had established that the insurer breached its duty of utmost good faith in how it handled the claim and by failing to disclose information.

She said the evidence showed Catlin did not act fairly and reasonably in arriving at a decision to offer only $500,000 for the stock, an amount that was never paid, and that its decision would have been different, had it not breached its duty.

Catlin did not plead fraud, so neither Diamond World’s rejection of the $500,000 offer, nor the fact that general manager Khosrow Chohaili’s evidence established that part of Diamond World’s initial claim had no basis, could relieve the insurer of its contractual obligation to pay for the loss Diamond World did substantiate it had suffered in the robbery, A/J Schmidt said.

Armed thieves

In December 2017, three masked thieves armed with knives and hammers threatened staff working in the Bankstown jewellery shop, smashed six glass-topped showcases and stole stock which they put into bags, before escaping in a vehicle driven by a fourth offender.

The robbers were later caught and successfully prosecuted, after Mr Chohaili gave evidence, but only a small amount of jewellery was recovered. Some items were dropped as the thieves escaped.

Diamond World argued the thieves damaged jewellery that remained in the floor cabinets during the robbery. It was dented or scratched by the hammers used to break the glass and the glass itself as it shattered and was contaminated by the robbers’ blood.

Diamond World claimed more than $1.7 million, which it said was $1,307,597.02 for the cost price of the stolen stock, $397,183.37 for damaged stock, less the value of subsequently melted gold and loose stones that could be reused, and $9,600 for the damaged cabinets.

Catlin initially offered to pay $8,600 net for the damaged cabinets and $367,990.78 for stock.

A/J Schmidt said Diamond World was initially unable to give police or the insurer a list of the stolen jewellery; the two shop assistants were traumatised and could not help identify the stolen jewellery they had displayed in the smashed cabinets that day; and police were surprise at the size of the claim, advising the insurer’s loss adjuster the offenders were thought to have been inept drug addicts who had dropped most of the jewellery on the way to the getaway car.

Smashed cabinets

Diamond World’s initial claim was for all the stock in the smashed cabinets on the day of the robbery. It argued what had been left behind had been damaged and the gold later melted, in accordance with an agreement purportedly reached between the insurer’s and Diamond World’s adjusters.

The insurer requested documentation of the loss, which A/J Schmidt said “was hampered by the nature of Diamond World’s paper-based record-keeping system” and by Mr Chohaili melting down jewellery left behind in the smashed cabinets, which she said was ‘inexplicable”.

In May 2019, the insurer accepted that Diamond World had suffered a genuine loss which fell under the policy cover and in a 31 May letter advised Diamond World a net payment of $8,600 would be made for the damaged cabinets and clean-up. It sought to negotiate the balance of what Diamond World was owed.

But Catlin rejected liability for any jewellery left behind and later melted. Diamond World’s final claim reflected the value of the gold recovered in the melt, and of diamonds not damaged in the melting process.

In October 2019, the insurer made its written offer for $500,000, which Diamond World did not accept. “In its amended defence, however, it admitted liability for only $367,990.78, the calculation of which has not been explained. Despite this, even by the time of the hearing, the insurer had made no payment under the policy, even though it had received a request from Diamond World’s solicitor, seeking payment of the admitted sum,” A/J Schmidt said.

The insurer argued Diamond World’s records were incomplete and unsatisfactory and the claim was “false, exaggerated, unsubstantiated and tendentious”. It argued Diamond World was obliged to keep proper records but had failed to do.

But A/J Schmidt said if Catlin has wished to impose an obligation on Diamond World to keep “proper records”, that had to be done expressly but “proper records” was never defined in the policy.

Serious mistake

Mr Chohaili agreed he had made a serious mistake in melting the undamaged jewellery, treating all stock remaining in the smashed cabinets as if it had been damaged. But A/J Schmidt said that action did not mean his evidence was neither credible nor reliable.

In her second judgement, delivered on 30 November 2021, after the parties failed to agree on costs, A/J Schmidt ordered that interest be payable from 4 October 2019.

She said the insurer acted unreasonably in refusing the entire claim in October 2019, despite its earlier acknowledgment of liability. Because its offer of settlement was not accepted, did not establish that it acted reasonably in refusing to make any payment under the policy for either the damaged fittings or the stolen stock.

She ordered indemnity costs be paid from 18 August 2021, the day on which Diamond World made a $1.2 million offer of compromise and two months before the trial began.   


Diamond World Jewellers Pty Ltd v Catlin Australia Pty Ltd (No 2) [2021] NSWSC 1540 judgement 30/11/21

Diamond World Jewellers Pty Ltd v Catlin Australia Pty Ltd [2021] NSWSC 1431 judgement 5/11/21

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