My client lost a valuable diamond tennis bracelet, and reported the loss to State Farm.  State Farm’s homeowners policy required it to "replace" the bracelet.  Instead of offering a suitable replacement, State Farm offered my client a check, and advised her that it had contacted a vendor who stated it could replace the bracelet for the amount of the check.  The problem with this (besides the fact that it violated the terms of the policy) was that if the bracelet was not a suitable replacement my client would then be embroiled in a dispute with the vendor while State Farm would be off the hook.

I filed suit and sought to force State Farm to physically replace the bracelet.  State Farm argued that its tender of the check was sufficient.  The court ruled today that State Farm’s policy required it to provide my client with a suitable replacement bracelet – not a check. 

The central question in the case was one of policy interpretation.  But, a side issue was who should bear the risk of non-performance by the vendor.  State Farm’s position left the insured to bear the risk in the event of non-performance by the vendor.  My position was that the insurer should bear that risk – and assumed that risk under the terms of the policy.