NEW YORK, NY.- When Steve Wynn, the casino magnate, put his elbow through a Pablo Picasso he owned, there was little doubt about the damage he had done to a painting he hoped to sell, in 2006, for more than $100 million.
The silver-dollar-size hole in the canvas spoke for itself. His insurance company seems to have disputed only how much value the painting might have lost.
But things are not so straightforward in another insurance case that also involves blue-chip art and a boldface billionaire. Four years after a fire at Ronald O. Perelman’s East Hampton estate, holding companies to which he is connected are suing his insurers, contending that the blaze damaged five of his artworks worth $410 million.
The complaint doesn’t claim the paintings were charred, heavily smudged by smoke or left sodden by the water of firefighting hoses. But Perelman said he noted something was off about the works — two Andy Warhols, a Cy Twombly and two by Ed Ruscha — when they were returned, months after the fire, to their old spots inside the house.
Perelman monitored them, he said, and saw changes that were of unmistakable significance.
The Twombly had lost its “oomph,” he testified.
“All of the pictures lost their luster,” he said, “lost their depth, lost some of their definition and lost a lot of their character.”
The insurance companies take a different view. The works, the defense argued in court papers, had been fitted in “museum quality” protective cases and had “not sustained any detectable damages” as a result of the fire.
“The five paintings did not come into direct contact with either the fire or the water that was used to put out the fire, and sustained no visible damage from the fire,” the insurers wrote in a court filing.
Today, two years after the suit was filed in New York state Supreme Court in Manhattan, the case, first reported by Artnet, shows no sign of winding down. The voluminous docket includes some 300 filings, and each side has presented competing experts to debate existential questions of art insurance: What exactly constitutes damage, and how can it be measured?
Perelman’s side has bolstered his personal observations with a 400-page report that includes chemical analyses of the works. They were exposed to extreme heat, smoke, soot, rapid environmental fluctuations and chemical and water vapors, the lawsuit says, and have undergone “accelerated aging and molecular changes.”
The insurers have their own experts, including a conservation studio that concluded that imperfections noted by Perelman’s side existed before the fire. Another company, Combustion Science & Engineering, wrote that the cases protecting the artworks “showed no thermal damage” and could not have been penetrated by water vapor or soot.
What is more, lawyers for the insurers have gone so far as to challenge Perelman’s motives, noting in court papers that he waited until 2020, almost two years after the fire, to claim it had damaged the works.
“It is suspicious enough that Mr. Perelman waited so long to make his insurance claim,” a lawyer wrote last summer, before continuing, “Adding yet more grounds for suspicion is the fact that Mr. Perelman’s belated ‘discovery’ of the damage happened to coincide with a time when he desperately needed to supply his businesses with cash.”
A week later, lawyers for the holding companies connected to Perelman accused the insurers of engaging in “irrelevant commentary.”
“Insurers’ letter speculates at great length about the financial situation of plaintiffs’ ultimate owner,” they wrote in a filing, adding, “But the underlying reasons why parties seek their desired outcome are irrelevant to the merits of the claims.”
The September 2018 fire at the Creeks, Perelman’s 72-acre East Hampton estate, started in the third-floor attic of the main residence and burned through the roof, causing part of the attic floor to collapse onto the floor below. The fire was extinguished about two hours after it began.
Flames did not reach the ground floor of the residence, lawyers for insurers have said in court papers. The paintings by Warhol, Ruscha and Twombly were removed from that floor during the fire, they said, part of an effort in which works were stored briefly in an outside breezeway and then moved into a theater on the property.
Once the works were returned to the estate, Perelman said in a deposition last year, he “noticed some changes” and decided to monitor them. He noted the Twombly, an untitled paint and wax crayon work on canvas from 1971 that features a series of looping, overlapping lines, “didn’t have its spark.”
“It didn’t have its distinctive definition in the lines, in the swirls,” he continued. “It just lost — it just lost its oomph.”
Asked by a lawyer whether he was simply describing his feelings or rather damage that “can actually be seen and quantified,” Perelman said he was relating what he had personally observed.
Was there a photograph or other evidence, the lawyer asked, that corroborated his view that Ruscha’s “Standard Station,” an image of a gas station, had suffered? Perelman answered, “I don’t have to corroborate it.”
“I decided to monitor certain possessions and see what they did,” he said, adding, “And during my monitoring, this is what I saw. Me. This is what I saw, and this is why I decided that they were damaged.”
Perelman, 79, a businessperson who bought the Revlon company in 1985, has relied on the strength of his opinions for decades, whether the setting be litigation, philanthropy, tempestuous divorces, or purchases of art. He is an avid collector with long-standing experience in judging works both as aesthetic objects and potential investments.
“I think I’ve got a good feel for the art market,” he said in the deposition, adding, “I think I’ve got a very good eye.”
Perelman added that although he had employed a number of curators over the years, he had always been “the ultimate determinator of what we buy.”
Underwriters at Lloyd’s of London as well as insurers in Luxembourg and Germany said that Perelman had been allowed in his policy to set valuations for artworks he owned, a consideration he had asked to be afforded “as a collector.”
The idea, they wrote, was that he would be able to quickly replace any damaged work by buying a replacement from another collector, even if the asking price was above market, adding, “Mr. Perelman did not want to have to wait for a suitable piece to become available at auction or through a dealer.”
Typically, the higher his valuations, the higher the premium that Perelman would have paid. But, even so, insurers said they now view the valuations he came up with as “inflated.”
Ross Buchmueller, the president and CEO at Pure Insurance, which is not involved in the lawsuit, said even in cases where insurers accepted that artworks that survived a fire had lost some of their luster or character, questions would remain about the extent to which their value had been diminished.
There is reason to believe, he said, “that lack of oomph will still sell for a ton.”
Wynn’s mishap led to perhaps the best-known art insurance case in recent memory. He had purchased “Le Rêve,” a painting by Picasso that depicts the artist’s mistress, Marie-Thérèse Walter, several years before the elbow accident and had just agreed to sell it for close to $140 million to hedge fund mogul Steven Cohen. Then, Wynn, who has an eye disease, punctured the canvas while showing it to guests, including Nora Ephron and Barbara Walters.
“The blood drained out of their faces,” Wynn later said of his guests, describing his mistake as “the world’s clumsiest and goofiest thing to do.”
Wynn sued Lloyd’s of London, saying the company failed to respond properly to his demand for payment of $54 million in lost value for the work. Lloyd’s acknowledged that it was on the hook for Wynn’s loss, according to the lawsuit, but had not agreed to how large that loss was. The episode ended happily enough for Wynn. An art restorer repaired the canvas, and in 2013, Wynn sold “Le Rêve” to Cohen for $155 million.
In the Perelman case, several early exhibits in the case were redacted, removing details related to the paintings and their ownership and even which experts had been asked to examine them. One document, titled “Examination Under Oath of the Plaintiffs Owner,” is completely blacked out.
But the court docket includes snippets from deposition transcripts that offer glimpses into how Perelman and his associates developed and addressed concerns over potential damage.
John Winkel, who worked for Perelman and handled the insurance claims related to the five paintings, said they were monitored after the fire by people “looking for anything, stains that might become visible, something that could be seen with the naked eye” to indicate they had suffered damage attributable to the fire.
Nothing of that sort materialized, Winkel said, but Perelman “had become absolutely convinced that there was damage to these pieces simply because of the conditions they were subjected to and the nature of the media that were used by the various artists.”
Winkel also said that Perelman had personally set the values for the five works at $410 million.
“He’s one of the most astute collectors in the world,” Winkel said. “He knew what he was going to pay for things, what he would have to pay if he had to replace it.”
Perelman said in testimony that he could not explain his relationship with the holding companies suing the insurers but added that one of his lawyers could address that. He replied at length, though, to questions about what he had spotted in the artworks after the fire. Referring to “Elvis (21 Times),” a Warhol silk-screen showing images of Elvis Presley’s face, Perelman said that black and silver parts of the work had blended together.
“It doesn’t pop like it used to,” he said.
“You know, I go back,” he continued. “That’s why they called it Pop Art.
“A picture is like a piece of music,” he said. “I mean, if the piano is out of key, and you’ve heard the piece performed on a piano that’s in tune, you know the difference.”
This article originally appeared in
The New York Times.
