Wealth Exposed: Insurance Planning for High Net Worth Individuals and Their Advisors

CHAPTER 3

Life Is Too Short to Drink Cheap Wine

A friend of a client of mine, a somewhat eccentric but highly successful real estate mogul, was a connoisseur of fine wines and expensive cigars. Geoffrey was also a self-proclaimed wise-guy who gained immense satisfaction by profiting from loopholes in contracts and the law. On one of his many trips to Europe, he purchased a box of 45 “Behike” cigars made by Altadis of Spain. Named for the tribal chief of the ancient Taino tribe from Cuba, only 4,000 of the limited Cohiba brand cigars were released. At $19,000 per box, each time he lit up he burned $420.

As he did with all of his valuables and collectibles, Geoffrey had the box of cigars insured to protect them against hazards, such as fire. After he smoked all 45 cigars, he filed an insurance claim stating that the cigars had been “consumed by a series of small fires.” Of course, the insurance company took him to court, but they were stunned when the judge found in favor of Geoffrey with an order to pay the full claim. The court found no specific language in the policy excluding any particular kind of fire—the exact loophole Geoffrey was counting on. Triumphant once again, he swaggered into his bank with the check. The moment he received his deposit slip, he was arrested and charged with 45 counts of arson—one for each cigar. Having run out of loopholes, he served two years in a state prison.

You probably figured out that this didn’t actually happen. It’s an urban legend going ...