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United States Supreme Court Rejects Attempt To Upset WCM's Win In $25 Million Art Loss

December 9, 2013

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On November 6, 2013, in Renaissance Art Investors, LLC (“RAI”) v. AXA Art Insurance Corp., the United States Supreme Court denied RAI’s petition for a Writ of Certiorari, bringing to a close a coverage battle that stemmed from the collapse of the Salander O’Reilly Art Gallery.

In March 2010, the now infamous art dealer Larry Salander pleaded guilty to a $120 million fraud scheme, admitting to stealing numerous works of art.  Renaissance Art Investors LLC claimed that it was entitled to coverage for Salander’s theft of approximately $25 million in artwork under insurance policies issued by AXA Art Insurance Corporation.

RAI consigned its artwork to Salander, a principal of RAI, and the Salander O’Reilly Galleries LLC, a member of RAI.  Ultimately, Salander and the Gallery betrayed RAI, stealing artwork valued at over $42 million.  RAI made a claim to AXA under its commercial inland marine insurance policies, seeking indemnity for the theft.  Litigation followed and the trial court awarded summary judgment in AXA’s favor, finding that there was no coverage for the loss under AXA’s policies.

In a unanimous decision, the Appellate Division, First Department, that the AXA policies contained unambiguous dishonesty exclusion.  The exclusion precludes coverage for losses arising from the dishonesty of an insured, anyone with an interest in the property, or anyone to whom the covered property is entrusted.  The Court held that this policy exclusion applied to both Salander and the Gallery, who were entrusted with the artwork.

The First Department affirmed the trial court’s decision, holding that as a matter of law, insurance coverage only extends to fortuitous losses, even under all-risk policies.  The Court explained that whether there was a fortuitous loss is a legal question to be resolved by a court.  Applying this standard, the Court held that the fraud perpetrated by Salander and the Gallery, which resulted in the loss, was not fortuitous.

The Court of Appeals (New York’s highest court) refused leave to appeal from the First Department’s unanimous decision.  RAI then sought review from the United States Supreme Court, citing conflicts in authority on procedural and jurisdictural issues.  But the top court in the land rejected RAI’s petition.  And so, WCM’s summary judgment win stands after levels of judicial scrutiny rarely seen in insurance cases.


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