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I just spent some time pleasure reading through various policies. Calif. earthquake lists artwork as "property not covered" and NFIP has a special limit of $2500 for artwork. For other policies, the limitation language for art seems to be parked in replacement cost for personal property endorsements. For antiques, an equal quality replica would probably satisfy the contract, but replicating a painting for payment is probably against the law. At the least it would be a copyright violation.

I don't think the HO-3 policy owes an exact replacement or even a match, but like kind and quality is probably a higher standard than just paying any old painter to paint a few trees and a mountain to replace a Thomas Moran painting. For an appreciating asset, AC is not that much less than RC.

I've just read several different ISO DP and HO policies and found very little that limits coverage on paintings. I see a lot of different limiting language about antiques, fine art, historical value in the replacement cost endorsements, how would that limit coverage for the ACV of a painting that is worth more today than when purchased? I see some "functional value" language in guidelines, but I can't find any policy language like that this morning.

Before I was an adjuster, I was an art dealer for several decades. We helped adjusters find comparable prices for damaged paintings and prints and we helped appraise values of art for insurance purposes. It wasn't our place in those days to worry about whether they were covered under the HO policy or SPP but I don't remember any adjuster asking us to paint a replacement. I know there are adjusters that deal with this everyday. Maybe one of them will chirp up!

I wrote that wrong. We didn't help adjusters find replacements for paintings. We helped them find market prices for certain artists and certain subject matter. For instance, Porfirio Salinas is known for painting bluebonnets. A bluebonnet painting by him of a certain size would be worth a certain range. Other subject matter might be worth more or less. We just located a number of available pieces as similar in subject matter and size as possible. I don't know what they would do with this information to settle the claim. We did this as a free service. We got restoration work on frames and print sales for trouble.

In those days, there were dealer networks. Today, with computers it is much easier to find the value of these things through subscription services.

Look, Ray I have to admit I'm not real clear myself on the precise way to adjust a fine art painting on an HO3 because I don't do a lot of HO3 personal property. I do know that it is always good to think these things through and even if some of these issues don't come up that often it's the one time it does come up that can bite an adjuster in the behind.

And I do think that many people tend to just fall back on some rule of thumb that may not always be correct. Like the adjuster in the court case I mentioned who the judge says was doing it wrong for 20 years. Maybe it was the judge who was wrong but it didn't seem like the adjuster could give a good explanation of why he was doing it the way he was doing it.

I think it's important to be able to explain why a loss was settled a certain way (using policy language) rather than say "that's how we always do it". That way, even if someone disagrees it is harder to claim bad faith, because the adjuster thought it through etc.

I love the heartland of this country and someday hope to move to a farm in Texas. So I don't mean any disrespect at all but there are parts of this country where claims are filed for damaged farm equipment, hail damage to mobile homes, and livestock hit by cars. I happen to live in an area where I get claims for gunshots hitting buildings in one part of town and rich people with $20,000 antique walking cane collections. I would be lost trying to handle some of the claims you are familiar with and the reverse might be true also.

Keep in mind that if you feel like fancy artwork questions don't come up that often for you think about it from my perspective: I've never handled a hail claim. We don't generally have hail in California.

One mistake a lot of Cat adjusters make on California claims is that they will start adjusting the HO3 without asking or realizing that the HO3 is DIC and secondary to the DP1 that I am adjusting. A lot of times the CAT adjuster will have recommended payments without realizing the insured has a primary policy with a DP1 carrier.

Back to that PICASSO, if it had been burned or stolen, how much would the loss be worth?  Remember no one thought it was worth anything. There was no documentation. You probably wouldn’t have felt much pain. It probably wouldn’t have brought much on the claim.

Now you have documentation, but what if it really wasn’t real but you and the insurance company think it is. If you scheduled it for an agreed price based on the value of a genuine Picasso, and then it was later stolen, damaged, or destroyed, how much would your claim be for? What's the chance of the adjuster looking at the ashes and saying, "This was a fake!"

Would it even matter that it was a fake if both the insured and the insurer thought it was real and agreed on its value?

There are famous forgers whose fake paintings are worth more than the original artists they forged.

The market value of art is a perception, but the insurance contract is real.

Great question.

I think it is probably like stated value in Louisiana. In Louisiana, if a house worth $150,000.00 is insured for $200,000 and burns down due to fire, the insurance company must pay the $200,000. In Louisiana the time for the insurance company to disagree with the valuation is when the policy is underwritten, not once the house burns up.

I could be wrong but if the insured gets an item scheduled as a genuine item for a certain dollar amount I think the carrier has an opportunity at the time of underwriting to disagree. Once the carrier agrees to schedule the item as genuine I don't think they can back away later, except maybe if they can prove fraud. My guess is maybe the burden of proof probably shifts: for an unscheduled item the insured needs to prove what it was worth. For a scheduled item the carrier has to prove it was NOT worth what was claimed.

Just my guess. Not that many people have scheduled personal property. And I could imagine state case law would make a difference.

Maybe someone who handles scheduled PP can tell us, thank you.

"Would it even matter that it was a fake if both the insured and the insurer thought it was real and agreed on its value?"

My wife was worried about dropping off her wedding ring to be cleaned because she has heard stories of jewelers switching out the diamond and giving the ring back with cubic zirconium.

So I could easily imagine a situation where somebody could have a fake item that they thought was real and the insurance company also thought it was real and paid the claim.

Fake Rolexes also come to mind- every once in a while somebody will have a fake Rolex that they think is real. They might wear it for years thinking it is real. If they make a claim of course they will want the money for a real one.

Big Red requires a certified appraisal on anything you want to schedule on your HO policy. They do have the option of using one of the replacement services.

I have worked HOC which is all risk on A & C coverage and inland marine since I was trained in property. Most wealthy people schedule these expensive items and this stops the conversation, ut we do have the right to replace. I have replaced many diamonds "that fell out of the setting"   "was flushed down the sink with the dish water" " lost it on the beach at Hilton Hotel in Miami" the inland marine and the broadest HO policy do not argue, then get the stone replaced by a friendly jeweler, furrier, art dealer etc. It,s what adjusters do.

I remember reading that the Louisiana stated value law only applies to FIRE total losses, not other perils. Apparently it might apply to other perils too, but not situations with combinations of covered perils and uncovered perils.

try this Insurance Journal article:

http://www.insurancejournal.com/mag.../68089.htm

Here's a link to an attorney's commentary on how insured's are trying to collect stated value on perils other than fire.

http://papers.ssrn.com/sol3/papers....id=1547243

I had no idea anybody was even trying this; i thought the policy language was clear that it only pays policy limit on total loss fire.

Going back to the scheduled personal property I asked another California adjuster with a lot more experience than me. About 10 years ago he worked for that really big national carrier that is switching to Xactimate. He said as far as he could remember, any total loss scheduled personal property would be almost automatically paid at the scheduled amount with little or no investigation, other that to verify that the item was actually destroyed. He told me as far as he remembers there was no effort to re-evaluate the value of the item, the insured would get the scheduled limit. Of course that was 10 + years ago, things may have changed.

So at least in his example, the total loss scheduled personal property gets paid just like a total loss fire house in Louisiana: the insured gets a check for the stated limit.

I would love to hear from other adjusters what their experience is with total loss scheduled personal property.

Now in the example Robby R. mentioned it is my experience that there isn't much liability for over-insuring a property. Think about it- the insured could really only make two claims: 1) because my agent overinsured my house he set me up for an emotional let down when I didn't get all the money I was expecting for a loss I didn't suffer, and 2) I overpaid $400 of premiums over that last year. The first claim would get thrown out of court and the second is not enough money to bother with.

The other issue you bring up is pretty well established in the adjusting world: if the insured had a previous loss that they were paid for but didn't repair, the carrier doesn't owe to pay twice on that portion. So if after Rita the insured was paid $10,000.00 for extensive shingle repairs and the insured never made any repairs, once Katrina comes around and the adjuster estimates $50,000.00 for total roof replacement the insured will only get the $40,000 difference. This is why adjusters are supposed to pull the previous claim files.

Texas is one of the dtates that has a valued policy, that is liquidated for the face amount from a fire on the BUILDING only.