Partner, Head of Financial services
Out-Law Guide | 23 Jul 2008 | 10:53 am | 3 min. read
Michel Kamidian v Anthony Wareham Holt and others
This was a claim against insurers for damage to a valuable artefact, the Dr Metzger Egg Clock, while it was on loan for exhibition in the US.
The claimant bought the egg clock at auction at Sotheby's in 1991 for about US $105,000. The purchase was made on behalf of the claimant and another, but the details of this arrangement were shadowy. One of the main issues at trial concerned ownership.
Another concerned provenance. According to the claimant, the egg clock was made by Fabergé and should be placed in the same category as the famous Fabergé eggs made for the Tsar of Russia. Sotheby's 1991 catalogue description and guide price, however, did not recognise the piece as a Fabergé item. The claimant maintained Sotheby's had failed to attribute it correctly.
In 2000, the claimant loaned the egg clock (and other items) to the organisers of a Fabergé exhibition in Delaware. As is usual in such arrangements, the organisers arranged packing and shipment and suitable insurance cover against the risk of loss or damage.
The policy was a Fine Art Exhibition All Risks insurance policy. The agreed insured value was based on figures given by the claimant: US$3.83 million for all the items, of which US$2.5 million was attributed to the egg clock.
On arrival in the US, the egg clock was found to have been slightly damaged in transit – a flower bud had broken off. On the return journey to London, a further two floral stems came off.
The claimant issued proceedings against insurers, the exhibition organisers and co-curators for the cost of repairs and for substantial depreciation to the egg clock's value.
The judge found on the evidence that there had been deficiencies in the packing, but that the damage did not cause any depreciation in the egg clock's value (whatever that value was).
The second two stems had been broken and repaired on an earlier occasion and all three could be repaired at a cost of about £1000. The claimant, therefore, succeeded in his claim against the exhibition organisers for this amount.
The claim against insurers failed. After a trial lasting nearly three weeks, the judge was unable to find on the balance of probabilities that the claimant actually owned the egg clock. This was enough to defeat the insurance claim. But, in any event, he found insurers were entitled to avoid the policy for material misrepresentation.
The judge concluded on the evidence that the egg clock was not by Fabergé. This called into question the nature of the representations made to insurers on the claimant's behalf at the time the cover was placed.
He rejected the suggestion that there had been a representation of fact that the egg clock was by Fabergé and so had a value of US$2.5million. When an artefact is over 100 years old and there is no documentary evidence available, its authenticity can only ever be a matter of opinion and belief.
Under section 20(5) of the Marine Insurance Act 1906, a representation as to a matter of belief is true if made in good faith.
In the context of household contents insurance, this has been held to mean that the person making the representation must honestly believe it is true. If honestly made, the representation does not become untrue because it can be shown there were no reasonable grounds for the belief.
But in the context of fine art insurance arranged by professional exhibition organisers on behalf of collectors and dealers, the judge thought it would be wholly uncommercial and unlikely for insurers to agree an insured value on the basis of a subjective belief for which there might be no reasonable grounds.
In the judge's view, the implied representation was that there was a general acceptance in the art world that the piece was an authentic Fabergé egg clock. This was a simple statement of fact, provable by showing a predominant opinion amongst those in the know.
In this case, insofar as there was a consensus at all, it was to the opposite effect. Consequently, the implied representation was not true.
At the very least insurers should have been told that, on the one occasion the item was sold publicly, it had not been described (or priced) as a Fabergé egg, indicating serious doubt as to its provenance and, therefore, its value. Insurers could then have decided for themselves whether or not to accept the claimant's assertions.
The misrepresentation was clearly material and there was no dispute that insurers had been induced by it to offer cover on the terms they did. Insurers were entitled to avoid the policy.
The judge was able to side-step the difficult issue of a representation of opinion by finding the implied representation was one of fact as to the art world's view of the egg clock.
Facts are provable. Opinion is subjective and, according to the Marine Insurance Act, "true" as long as made in good faith. An insured making a wild guess, or one who knows there is no basis for his opinion would probably not be acting in good faith. But an insured who makes a statement he genuinely believes is true, whether or not there are any reasonable grounds for that belief, is not making a misrepresentation.
Partner, Head of Financial services