are claims adjusters who have little or no
experience in marketing or selling the
work of a particular artist. Others are
private art dealers or work at auction
houses like Christie’s or Sotheby’s with
significant expertise in a specific artist’s
work. Claims and subrogation professionals should thoroughly evaluate the
qualifications and potential bias of prospective appraisers.
In the end, the appraisal expert needs
Water damage to a Mark Rothko oil painting
requires a different response than smoke damage
to a rare Ansel Adams photograph.
to be highly qualified, competent, credible, and someone who has done his or
her homework. The last thing you want is
an appraiser who simply tells you what he
or she thinks you want to hear.
Post-Loss Market Values
In addition to establishing the predamage market value of the art, it is also
necessary to determine the post-loss
market value. This is easy when the art
is completely destroyed or consumed in
a fire; however, in cases where conservation efforts are undertaken to remediate
the damage, a determination must be
made of the post-conservation market
value of the art. This can be particularly
challenging because the owner of the art
before the loss oftentimes retains ownership after the loss and after conservation.
In those cases, the loss in market value
can only be estimated.
Most art appraisers estimate the post-conservation loss of market value in
terms of percentages. For example, if the
work of art had a pre-loss market value
of $1 million, and the appraiser estimates
the post-conservation loss of market
value at 25 percent, then the provable
loss of market value would be $250,000.
Given the subjective nature of this exercise, the qualifications, methodology, and
credibility of the expert that appraises the
post-conservation market value of the art
are paramount. If the art is actually sold
after conservation is completed, then the
sales price will probably be sufficient evidence of post-conservation market value.
Because of the subjective nature of art
as well as the price volatility in the art
market, paying attention to the details of
the damages aspects of fine arts losses will
pay dividends with respect to your first-party exposure—and it will significantly
improve your ability to maximize your
subrogation recoveries. K
Stephen Halbeisen is chair of Cozen
O’Connor’s Subrogation & Recovery
Department’s South Central region. He
has handled cases involving fine art losses, fires and explosions, products liability
claims, petrochemical losses, structural
collapses, roof failures, mechanical
failures, warehouse liability, public utility
negligence, and construction defects.
Contact him at firstname.lastname@example.org