Consignment Risk for Jewellers: The Insurance Blind Spot That Can Sink Your Business

You place RM150,000 of your best pieces with a high-end boutique on consignment. Three months later, the boutique is burgled. Your pieces are gone.

You call your insurer. They say your policy covers stock on your premises. The boutique's insurer says their policy covers the boutique's own stock. Nobody covers your pieces in their shop.

This is the consignment blind spot, and it destroys jewellers every year.

This guide explains:

• How consignment creates insurance gaps
• Who's legally liable when consignment stock is lost
• What your insurance actually covers (and doesn't)
• How to protect yourself when giving or receiving consignment
• The documentation that matters

How Consignment Creates Insurance Gaps

Consignment means placing your goods in someone else's possession for sale. They don't own the goods. You do. They sell on your behalf and take a commission.

The problem: insurance policies are written around ownership and premises.

Insurance Type	What It Typically Covers
Your fire/burglary policy	Your stock on your premises
Their fire/burglary policy	Their stock on their premises
Your Jeweller's Block	Your stock, possibly including "stock elsewhere"
Their Jeweller's Block	Their stock and stock they hold for others

The gap appears when:

• Your policy only covers your premises
• Their policy only covers their own stock
• Nobody's policy covers your stock in their shop

This is not theoretical. It happens constantly.

Who's Legally Liable for Consignment Stock?

When you place goods on consignment, the recipient becomes a bailee. A bailee is someone holding another person's property temporarily.

As a bailee, they have a duty of reasonable care. But "reasonable care" is not the same as "liable for everything."

Scenario	Who's Liable?
Bailee is negligent (left door unlocked, no alarm)	Bailee liable
Proper security in place, professional burglary	May be shared or disputed
Fire due to electrical fault in building	Often disputed
Stock damaged by bailee's employee	Bailee liable
Stock stolen by bailee's employee	Bailee liable
Stock simply goes missing, no explanation	Disputed, hard to prove

The practical problem: Even if the bailee is legally liable, can they pay? If a small boutique loses RM200,000 of your stock and doesn't have insurance or assets, being "legally right" doesn't recover your goods.

The Consignor's Risk (When You Give Stock to Others)

If you're placing your jewellery with retailers, hotels, or other outlets, you face these risks:

Your Stock in Their Shop

Your standard fire and burglary policy probably covers stock at your address. Stock at their address? Check carefully.

Policy Language	Likely Coverage
"Stock at the premises" (your address specified)	NOT covered elsewhere
"Stock at any location in Malaysia"	May be covered
"Stock temporarily elsewhere" with limits	Covered up to limit
Jeweller's Block with consignment extension	Usually covered

If your policy says "at the premises" and lists your shop address, goods at consignment locations are not covered.

Their Security Standards

You control security at your own shop. You don't control it at theirs. Questions you should ask:

• Do they have a certified safe?
• Is the alarm monitored?
• Do they clear displays overnight?
• Who has access to stock?
• Is there CCTV?

If their security is weak, your stock is at higher risk, and their insurer (if they even have one) may deny claims based on inadequate security.

Documentation Gaps

When you hand over stock on consignment, do you have:

Document	Purpose
Signed inventory with descriptions	Proves what you gave them
Photos of each piece	Condition evidence
Serial numbers or unique identifiers	Identification if recovered
Consignment agreement	Legal terms
Proof of insurance (theirs)	Shows they have coverage

Without proper documentation, proving what was lost becomes your word against theirs.

The Consignee's Risk (When You Hold Others' Stock)

If you receive consignment stock from suppliers, designers, or other jewellers, you face different risks:

Liability for Others' Property

You're the bailee. You have a duty of care. If stock is lost or damaged in your possession, you may be liable.

Your Insurance	Covers Consignment Stock You Hold?
Standard fire	Usually your own property only
Standard burglary	Usually your own property only
Jeweller's Block	Typically yes, "stock held in trust"

If you don't have Jeweller's Block, check whether your policy covers goods belonging to others in your possession. Many don't.

Concentration Risk

You might hold RM500,000 of your own stock. You receive another RM300,000 on consignment. Now you're holding RM800,000.

Is your coverage adequate? If your policy limit is RM500,000 and you have a total loss, you're underinsured.

What Happens When Things Go Wrong

Scenario	Your Exposure
Consigned stock stolen in break-in	You're likely liable to consignor
Consigned piece damaged during display	You're likely liable
Consigned piece sold, money not remitted	Civil and possibly criminal liability
Consignor disputes what was given	Documentation becomes critical

Insurance Solutions for Consignment

Option 1: Jeweller's Block with Consignment Coverage

A properly structured Jeweller's Block policy covers:

• Your own stock on your premises
• Your stock at other locations (consignment out)
• Others' stock in your possession (consignment in)
• Transit between locations

This is the cleanest solution. One policy, comprehensive coverage.

Option 2: Named Location Extensions

Some policies allow you to add specific consignment locations as covered premises. Works if you have a few stable consignment relationships.

Approach	Pros	Cons
All locations covered	Simple	May cost more
Named locations only	Lower cost	Must update when locations change

Option 3: Require Consignees to Insure

You can require the recipient to insure your goods and provide proof of coverage. This shifts risk to them.

But verify:

• Their policy actually covers goods held for others
• The limit is adequate
• You're named or at least the coverage is confirmed in writing

Consignment Agreement Essentials

A proper consignment agreement addresses insurance directly:

Clause	Purpose
Insurance requirement	Who must insure, what minimum coverage
Proof of insurance	Certificate required, you as interested party
Liability for loss	Clear statement of who bears risk
Security standards	Minimum security recipient must maintain
Inventory procedures	How stock is documented and verified
Return conditions	How and when stock returns to owner

Don't do consignment on a handshake. Written agreements with clear insurance provisions are essential.

Common Consignment Insurance Mistakes

Mistake 1: Assuming "They Have Insurance"

"Oh, they're a proper shop, they must have insurance." Maybe. But does their insurance cover your stock? Is the limit adequate? You don't know unless you check.

Mistake 2: Not Reading Your Own Policy

Your policy might cover consignment stock elsewhere. Or it might not. The only way to know is to read the policy wording, specifically the "property covered" section.

Mistake 3: No Documentation

Handing over RM100,000 of jewellery with just a verbal count is asking for trouble. When there's a dispute about what was there, documentation determines the outcome.

Mistake 4: Outdated Coverage Limits

Your insurance limit was set three years ago. Since then, you've added two consignment locations and doubled your stock value. Are you still adequately covered?

Mistake 5: Assuming Liability Means Payment

Even if the other party is legally liable, collecting can be difficult or impossible. Insurance should be your primary protection, not litigation.

Consignment Insurance Checklist

Before entering any consignment arrangement:

Check	Consigning Out	Receiving Consignment
Your policy covers stock at other locations	✓
Your policy covers others' stock in your care		✓
Consignment agreement in writing	✓	✓
Inventory with photos and descriptions	✓	✓
Their security standards verified	✓
Their insurance certificate obtained	✓
Your coverage limits are adequate	✓	✓
Return procedures documented	✓	✓

FAQ

If I have Jeweller's Block, is all consignment automatically covered?

Usually, but check your policy wording. Most Jeweller's Block policies cover stock you own at any location and stock you hold for others. But there may be limits, excluded locations (private homes, for example), or notification requirements for high-value consignments.

Should I insist consignment partners have Jeweller's Block specifically?

Not necessarily. What matters is that their coverage adequately protects goods held for others. That could be Jeweller's Block, a properly endorsed commercial policy, or another arrangement. Ask for the certificate and check what it actually covers.

What if the consignment partner refuses to show proof of insurance?

Don't proceed with the consignment. If they won't show proof of coverage, either they don't have it or it's inadequate. Your stock is at risk.

How often should I verify consignment stock?

Depends on value and volume. For high-value consignments, monthly physical verification is reasonable. For lower-value arrangements, quarterly may suffice. Document every verification.

Can I recover from my insurance if the consignee was negligent?

Yes, if your policy covers the stock. Your insurer may then pursue the negligent consignee through subrogation, but that's their concern, not yours. You get paid first.

What's the minimum documentation for consignment?

At minimum: written inventory with descriptions, photographs, signed acknowledgment of receipt, and a written agreement covering liability. Serial numbers or unique identifiers are strongly recommended.

Does consignment insurance cover trunk shows and exhibitions?

Usually a separate coverage extension is needed. Trunk shows and exhibitions have specific security requirements (minimum staffing, locked displays, overnight safe storage). Check your policy for exhibition terms.

If stock is stolen from a consignment location, who files the police report?

Both parties should. The consignee files because it's their premises. You file because it's your property. This creates a complete record for any insurance claim.

MINT Conclusion

Consignment is essential to how jewellery businesses operate. But it creates insurance gaps that catch jewellers unprepared.

The key principle is simple: know who's insuring what, and don't assume. Verify coverage, document everything, and use written agreements that address insurance directly.

MINT provides Jeweller's Block coverage designed for Malaysian jewellers, including consignment stock protection for goods you place with others and goods others place with you.

Speak with MINT about coverage