#Looting:
Insuring and Lawyering
Michael Sean Quinn, Ph.D, J.D.,C.P.C.U., Etc., Author
2630 Exposition Blvd #115
Austin, Texas 78703
(o) 512-296-2594
(c) 512-656-9759
All wars involve one side and/or the other
looting the ground it covers of good and sometimes great art. The Nazi’s were especially guilty of this
during WWII: there was lots of it to steal (after all it was Europe); Hitler
wanted a high class museum in his home village; some senior officers of the
German government and military had what they regarded as good taste, as least
with respect art. And some men in the field may have realized that after their
retreats were complete, they or they families, just in case, were going to need
all the money they could lay their hands on.
And besides lots of them said to themselves and sometimes to others,
much of it belonged to Jews; Hitler had killed—or would kill--off most of them,
or they had fled were gone for good. Running often involves grabbing.
For many
years some of the art has been returned when either discovered or
re-categorized. Sometimes the courts make returns happen, sometimes not. Many of the exchanges were done on a one to
one basis, but over time they are also sold through auction houses like
Christie’s and Sotheby’s. That has been
happening recently at both of these, and they are having different attitudes
toward the loot versus ownership problem. Patricia Cohen & Graham Bowley, Dispute Over Nazi Victim’s Art, NEW YORK
TIMES C1 (October 25, 2014).
I wonder now
about two things. What role might insurance play in these situations. And what
dangers might be there for lawyers.
Insurance
Of course,
whenever and where ever there are “heavy hitting” works of art and the person
who “has” has any money, the works will be covered by property insurance. To a considerable
extent the special first party policies coverage designed for fine art are pretty
much what one would expect. Liability
policies may be a little different.
For one
thing, most liability policies leave it open who may be a victim of the insured
who might be entitled to compensation under the policy. This would not necessarily be the case under
a fine art insurance policy providing coverage for a sale which is illegal
under the obscure and not-well-understood property law related to looting and “returning,”
or—better--handing over.”
Under one
policy, the seller of a piece would be the insured and probably the purchaser
would be the only person who could qualify compensable. Maybe the auction house
could be an additional insured. I guess the principal insured action would be a
failure to return when it was required. One of the buyer’s damages would be his
legal fees to obtain recovery. Another the amount he had to pay to obtain the
work of art, assuming he really wanted. Or it might be the amount of the return
to the seller which the buyer could have obtained if he could have been the
seller.
The auction
house might need liability coverage.
This might happen, for example, if Christie, say, didn’t do the kind of
work it should have done to investigate true ownership of the work. Of course,
the seller and the auction house could be insured under the same policy. In
fact, I would expect this to be true and that the house would require it and
get a certificate of insurance before it would be willing to so much as take
possession of it.
(Of course,
the house will also require that be liability coverage for its liability to the
seller if it were to cause damage to the work. Naturally, it cannot be the same
policy as the one just mentioned, where both the seller and the house are
insureds, but the house could specify or simply obtain a particular type of
policy while insisting that the seller pay for it.)
The buyer
might want liability coverage aiming at its possible liabilities involving
injuries done to the seller and/or to the auction house. This could be something so simple as a
physical loss it caused before it actually bought the policy. Or it might occur if the buyer breached its
contract to buy without the kind of justifications found in the policy.
Another type of liability policy the
seller might want is coverage for his selling the policy to someone when it was
not what he said it was. For example, it might not be a painting by X but a
forgery done by Y. (For those of you are interested in this sort of thing,
there is a substantial literature on the subject.) Obviously, the seller’s
coverage should extend only to his buyer and to no one else, unless that
buyer’s lenders or co-investers were included in the policy type being here
discussed.
One interesting set of questions
about these situations pertains to underwriting and the pricing of such
policies. Works of art are now selling for huge sums—many millions of
dollar. But mistakes of the type here
sketched are rare. Obviously, there would have to be detailed appraisals done
in advance my top flight professionals, and they would have to be insured. So
how could the peril be priced? Normal
actuarial methods could not be applied. Not even all the gods know how to do
it.
Legal Malpractice
There
is a handful of lawyers that are involved in these type of transactions all the
time. Many of them are litigation oriented. Some represent the old time owners
or their beneficiaries, e.g., their grandchildren. Some represent the person or organization in
possession of the picture, say, at the point found. Often they represent the
museum to whom it has been given or who bought it. And a few represent the
gallery that is marketing and then auctioning it.
These
lawyers can be guilty of malpractice in a variety of ways. If the lawyer possesses a picture and then
sells it himself for himself or simply makes off with it, he will be guilty of
a breach of fiduciary duty. This can count as a type of malpractice.
Usually
lawyer malpractice involves negligence performance or omission. This can happen in a variety of ways. T he most problem is one of proof. Usually professional negligence is determined
by comparing and contrasting the conduct of the accused lawyers with other
reasonable, reasonably prudent and knowledgeable practitioners who are adjudged
reliable experts. That is no simply
problem in the situation under discussion here because there aren’t very many
of them, so if two of them disagree, it is not clear that reliability can be
established, since there are so few experienced lawyers in the population
that’s relevant.
For
me, the most interesting problem regarding this kind of malpractice is what
faces the lawyer who provides formal opinions as to who owns what and how much
they own, if there are any fractions.
This is an easy place in which to make a mistake. Of course, this is a
standard problem in transfers of property.
It is true even for old property that has changed hands a number of
times. And it is true where property may be controlled by the laws of different
jurisdictions. It is not, however, so
easily true when one or several persons have had possession of the object for
perhaps more than a generation, even if no one has sold it to anyone. Nor are any of these problems simplified or
made more reliable by the fact that looting is the original possession.
(A
friend of mine is thinking about writing a novel in which the Germans loot it
from a French museum, a Portuguese woman steals it from the German officer, the
grandson of the Jew whose painting it was runs off with it, gives it to his sister and dies, while
the sister is arranging for its sale.
How many separate players might there be in this suit? How would
limitations period, whether statutory, equitable, or procedural work? How many
times would they have to be applied. And what if at least four different
countries are legitimately involved? He thinks he wants the Portuguese woman
murder the selling sister, but I have told my friend that the murder is
antifeminist, a proposition both she and her brother—who is also her
cousin--reject.)
Things
can get even more complicated when the attorney is rendering an opinion on a
piece of the relevant type property for an insurer or a prospective
insurer. Of course, insurers seldom very
seldom sue their own lawyers. Nevertheless, such a lawyer should obtain a very
substantial applicable malpractice policy of the right sort, might wish to make
sure that there is excess coverage, and might even consider obtaining at least
some of his coverage from the insurance company that is his client.
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