As details emerge of a massive $410 million insurance claim from US banker and art collector Ron Perelman linked to five works of art damaged in a fire, the Kukje Gallery in Seoul and Busan (and its associated Tina Kim Gallery) have faced with legal action from Judd. foundation over the “irreparable damage” to the sculpture.
Both cases remind the industry that reconciling the value and condition of works of art in insurance disputes remains a far from unambiguous practice.
According to Artnet news, several holding companies owned by Perelman (called AGP Holdings) are suing insurers (identified as underwriters of Lloyds of London), alleging that a number of jobs engulfed in a 2018 fire on the banker’s East Hamptons estate have lost their appeal. . These include the work of Ed Ruscha, Andy Warhol and Cy Twombly.
Meanwhile, the Judd Foundation claims that Donald Judd Untitled1991, the sculpture is no longer for sale due to fingerprints left on its surface, and it is argued that although the insurance company paid out 80% of the sculpture’s estimated $850,000 fair market value (as stated in the cover), the gallery must replenish the remaining amount. amount, plus legal costs, in accordance with the terms of the 2015 consignment agreement.
When is damage really damage?
“Such cases are becoming more common,” says David Scully, mediator at specialized dispute resolution firm ArtMediation and author of the publication. Law and practice of insurance of fine arts, jewelry and valuables (2021).
“Firstly, there has been an increase in the number of buyer-investors, especially in the field of contemporary art, who often demand that their works of art be pristine. Secondly, the growth of collecting, especially of delicate contemporary art in the tropical and subtropical zone, has led to damage that can be exacerbated by environmental factors, for example, a painting can be incorrectly rolled, causing microscopic cracks in the paint, into which, in a dirty and damp the city dirt can get in and distort the picture – or just a sweaty hand that distorts the work of art.
For Perelman, the situation is further complicated by the fact that a period of time passed before the damage was revealed. That is, despite its public confirmation shortly after the fire (according to New York Times) that the blue-chip collection was largely unaffected, with only a few of the works suffering “minor smoke and water damage”, a year and a half later he noticed that some of them had lost “their sheen”. The insurers are believed to have paid out more than $140 million in the original claim, not counting the art in question.
Conservatives and valuation services have long helped the market to be neutral in such disputes. However, finding the right professional can be an increasingly difficult task given the expanding range of art in the industry. For example, digital art (especially art that exists exclusively on the Internet) remains somewhat of a mystery to an industry sector that depends on the period of trading in the market to establish value.
“However, digital platforms and technologies can also be useful for the claims process,” says Caroline Taylor, founder of the Appraisal Bureau, which is launching an application later this month to write immutable documentation directly onto the blockchain.
Slippery value system
Even when an agreement has been reached on who should pay, the value of lost profits is still difficult to determine. In an October lawsuit filed by Julie and Matthew Halbauer in Michigan, homeowners allege breach of contract by Hiscox syndicates for using a June 2021 appraisal of art lost in an apartment building fire rather than a later (and higher) 2022 appraisal of the year. . Details of the lost works have not been released, although court documents suggest they are worth “more than $20 million and less than $93.56 million”.
Scully notes that sluggish markets for some artists and a high number of private sales could also make it difficult for insurance companies to quickly assess the value offered.
Ultimately, the resolution of such claims comes down to balancing interests. As Robert Reed, Head of Fine Art and Private Clients at Hiscox, says (in a comment not linked to any particular case): “Given that 50% of art claims involve accidental damage, often resulting in partial damage to items, it’s a daily problem. […] Different experts will give different recommendations, the skill of art insurers is to find a reasonable number that is acceptable to all parties.”