A federal appeals court has upheld a lower court’s ruling in favor of a CNA Financial Corp. unit in connection with the theft of $1.7 million worth of iPhones, holding there was no coverage under a “newly acquired” policy endorsement.

Bedford, Ohio-based Berrylane Trading Inc. buys and sells cellphones, including iPhones, to companies and individuals across the United States, according to Friday’s ruling by the 6th U.S. Circuit Court of Appeals in Cincinnati in Berryland Trading Inc. v. Transportation Insurance Co.

In April 2015, a thief broke into Berrylane’s warehouse in Doral, Florida, and stole about $1.7 million worth of iPhones. Berrylane sought coverage under its policy with Transportation Insurance, a unit of Chicago-based CNA Financial Corp.

Berrylane’s policy covered “business personal property” at only one location, which was not the Doral facility. It also included a “newly acquired or constructed property” endorsement that provided overage for property “you acquire by purchase or lease at any premises” within the policy period.

The insurer denied coverage for the claim on the basis the warehouse was not listed as a covered location under the policy, and that there was no coverage under the newly acquired endorsement because the Doral location was acquired before the policy period.

Berrylane filed suit against the insurer, charging breach of contract and bad faith. The U.S. District Court in Cleveland ruled in TIC’s favor, which was unanimously upheld by a three-judge panel.

Berrylane’s arguments included that it was entitled to coverage under the “newly acquired” endowment because the warehouse was physically acquired after the policy began, even though the lease became effective before the policy period.

“We disagree with Berrylane’s position, as did the district court,” said the ruling. It is “legal, not physical, possession that ultimately matters. Applied in the insurance context, this is contrary to Berrylane’s argument that it is physical, rather than legal, possession that determines whether the insurance holder has acquired property,” said the ruling.

“Thus, both the lease agreement and the Endorsement suggest that Berryland acquired the warehouse when the lease became effective,” said the ruling. Because this was the case, “the district court correctly found that the Endorsement did not cover loss at the warehouse,” the ruling said, in affirming the lower court’s ruling.

In 2017, federal appeals court upheld a lower court ruling and ruled a Markel Corp. unit was not negligent in failing to provide adequate insurance for the owner of a leased warehouse that was subsequently heavily damaged in a fire.