{"id":1605960,"date":"2025-12-15T11:16:55","date_gmt":"2025-12-15T16:16:55","guid":{"rendered":"https:\/\/observer.com\/?p=1605960"},"modified":"2025-12-15T11:16:55","modified_gmt":"2025-12-15T16:16:55","slug":"art-collector-guide-fine-art-insurance-when-is-damage-to-an-artwork-total","status":"publish","type":"post","link":"https:\/\/observer.com\/2025\/12\/art-collector-guide-fine-art-insurance-when-is-damage-to-an-artwork-total\/","title":{"rendered":"Repairable or Ruined: How Insurers Determine Whether a Damaged Artwork Is a Total Loss"},"content":{"rendered":"
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Decisions are typically guided by specialists whose judgments balance material repair against long-term market perception. Observer Labs<\/span><\/figcaption><\/figure>\n

Fine art insurers hear lots of sob stories\u2014\u201cthe maid attacked it;\u201d \u201ca water<\/keyword> pipe burst and sprayed water<\/keyword> all over it;\u201d \u201cmovers dropped it\u201d\u2014but more important than what happened to an artwork is whether it can be repaired.\u00a0 Can the work be fixed for less than the overall value of the piece? Has the damage lessened the value of the object? Is the artwork a total loss? Entire teams set about puzzling out the answers to these questions, with claims adjusters, art appraisers, art conservators and sometimes even dealers. And the final verdict may not be entirely up to the insurer. \u201cThe owners of the artwork may get their own experts,\u201d Dorit Straus, an independent fine art insurance adjuster, told Observer. \u201cYou have people on one side and people on the other. It\u2019s always a delicate conversation.\u201d<\/p>\n

Those conversations may start out diplomatically but can become all-out wars when parties disagree. Billionaire art collector Ronald Perelman sued a consortium of insurers for $410 million, claiming that five paintings in his collection\u2014a Cy Twombly, two Ed Ruschas and two Andy Warhols\u2014suffered smoke damage in a 2018 fire at his Long Island, New York estate. In his lawsuit, Perelman asserted that his artworks had lost their \u201cspark\u201d and \u201coomph\u201d as a result of the smoke. The insurers contended that none of the five artworks was actually damaged in the fire and that their cumulative value was only $103 million. In September of this year, a New York State Supreme Court judge ruled against Perelman, siding with the insurers, stating that \u201c[t]he artworks [can] be enjoyed as they were before.\u201d<\/p>\n

The lawsuit was newsworthy in part because it was so unusual. When everything goes smoothly\u2014and most often it does\u2014an adjuster examines the artwork and then brings in a conservator with expertise in the type of art to determine if the damaged object can be repaired and for how much. Assuming the cost of conservation isn\u2019t significantly more than the piece\u2019s value, the artwork is quickly handed over to the conservator to begin treatment. \u201cYou don\u2019t want a long delay, because that could make problems much worse or even permanent,\u201d Straus explained. After repairs are complete, an appraiser (\u201csomeone with expertise in fine art, not a real estate appraiser or generalist\u201d) or a dealer with relevant expertise evaluates the object to determine whether the now-repaired work\u2019s value has declined and by how much. There is no mathematical formula; it\u2019s entirely circumstantial. It might be a small tear in a canvas, but it matters more if the tear is at the center of the painting or at the edge.<\/p>\n

A fine art insurance policy generally covers the entire cost of restoration. If there is a loss of value due to the damage, exceeding 30 percent, the insurer will pay the policyholder 30 percent of the insured value. With especially unique works of art, however, complications can arise. \u201cPhotographs are exceedingly difficult to repair,\u201d Albert Albano, former executive director of the Intermuseum Conservation Association, told Observer. \u201cOnce the homogenous surface has been disturbed, the damage is extremely difficult to camouflage, leading to a noticeable decline in aesthetic value.\u201d And presumably also market value. However, the extent and placement of damage to a photograph may determine the degree to which the market value has been affected, as is currently being argued in a New York State court over water<\/keyword> damage in 2011 to a section of a photographic triptych by Richard Avedon, The Chicago Seven <\/i>(September 25, 1969). The owner of the triptych, the Richard Avedon Foundation, claimed that the work was worth $2.5 million prior to the damage and only $50,000 after the accident, while AXA Art Insurance Corp. assessed the pre-damage value at $2 million and the subsequent value at $1.6 million.<\/p>\n

When there are disagreements between the valuations submitted by an appraiser for the insurance company and another by the policyholder, many fine art insurance policies have arbitration clauses that bring in a third appraiser to assess both valuations. In the Avedon dispute, the arbiter valued the photograph at $825,000 before the damage and $552,750 afterward.<\/p>\n

Other options exist, according to Mary Pontillo, national fine arts product leader at Risk Strategies, an insurance brokerage firm. \u201cA photograph may be reprinted by a living artist and even sometimes by an artist\u2019s estate, thereby avoiding a total loss. A total loss scenario really is determined on a case-by-case situation.\u201d<\/p>\n

With paintings, conservation may be done so well that damage does not adversely affect the fair market value. In 2006, casino owner Steve Wynn was showing a 1932 Picasso in his collection, La R\u00eave<\/i>, to prospective buyer Steven Cohen when he accidentally put his elbow through the canvas. The price at the time was $139 million. Restoring the Picasso took several years and involved stitching the canvas and filling in lost areas of paint, but Cohen remained interested in the work and, in 2013, purchased it for $155 million. (\u201cIt might have sold for more had it not been damaged,\u201d Straus said.)<\/p>\n

With older artworks\u2014Old Master paintings and even work by modern masters\u2014the insurance industry\u2019s fine art appraiser or expert may choose not to say that an object has been totally destroyed, \u201cunless it is no longer recognizable,\u201d Straus said. \u201cEven heavily damaged works may retain cultural significance, although determining what that works out to in actual dollars is not easy.\u201d<\/p>\n

With older artworks, the conversation about the extent of damage and loss of value typically occurs between the collector and the insurer (or their representatives). With works of contemporary art by artists who are still alive, the conversation broadens, as those artists may have a say in the matter<\/a>. Some artists will offer to repair their own works or want to select and supervise a conservator, while others might hold the view that their creations will never be the same, demanding that their names not be associated with the artworks. Under federal law, an artist \u201cshall have the right to prevent the use of his or her name as the author of the work of visual art in the event of a distortion, mutilation or other modification of the work which would be prejudicial to his or her honor or reputation.\u201d An artist disavowing his or her artwork can eliminate all market value<\/a>\u2014a reason that Sotheby\u2019s gave for removing from a 2011 auction a 1990 screenprint mounted on an aluminum sheet, Cowboys Milking<\/i>, by Cady Noland after the artist saw that a corner of the piece was damaged and told Sotheby\u2019s that \u201cher honor and reputation [would] be prejudiced as a result of offering [it] for sale with her name associated with it.\u201d A lawsuit brought by dealer Marc Jancou<\/a>, the consignor of the Noland work, was dismissed in 2013.<\/p>\n

More for art collectors<\/b><\/h3>\n