In a matter of first impression, the New York Appellate Division (1st Dep’t) held, on February 13, 2018, that a fine arts dealer all-risk policy does not provide coverage for defective title, notwithstanding that the policy was silent with respect to defective title. Plaintiff (a Chelsea Art Gallery)’s claims against its art insurance brokers were also dismissed. See: DAE Assoc., LLC v AXA Art Ins. Corp.
The long-time assistant to famed artist, Jasper Johns, was allegedly stealing and selling John’s paintings. One such painting, evidently worth close to $1M, passed through the hands of Dae Associates (the Gallery). The Gallery guaranteed title and provenance (authenticity). After Federal agents intervened, the painting was returned, but the Gallery was still under contract to guarantee the $$. So the Gallery claimed under its fine arts dealer all-risk insurance policy. When the insurance company refused to pay (because the policy was not a title insurance policy) the Gallery argued that Arthur J. Gallagher (its broker for several years) should have told the Gallery to purchase title insurance. Not so, held the unanimous Appellate Division. Gallagher had no idea the Gallery needed this coverage.
DAE is significant because it provides insurers with reassurance that their fine arts dealers all-risk policies cannot be transformed into title insurance based on the mere fact that defective title is not mentioned in any exclusion. DAE also reaffirmed that, under NY law, an insurance broker is generally only required to obtain the coverage that the client asks for — under the well-reasoned rationale that the client knows their risk better than the broker.
Gallagher was represented by FKB’s Andrew Jones and Spencer Richards. If you have any questions on this, or other insurance broker liability matters, please email Andrew at email@example.com or Spencer Richards @ firstname.lastname@example.org