Facts
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 judgment
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.
Commentary
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.
