We previously posted that some notable art foundations have ceased authenticating art due to concerns over litigation costs and exposure.  Once such group is the Andy Warhol Foundation, who is currently locked in a battle with its insurance carrier, Philadelphia Indemnity Insurance Company, over whether its policies covered lawsuits arising out of authentication.

The Foundation was involved in an authentication dispute over a painting submitted by Joe Simon-Whelan.  The Foundation was eventually sued by Simon as part of a class action, and later named in a second similar class action lawsuit.  PIIC denied coverage initially but ultimately agreed to pay the full limit of  $2,000,000 of defense fees under its Errors & Omissions policy but nothing under its Directors & Officers policy.  The parties agreed to hold off on litigating the D&O coverage issues until the class actions were resolved.

Eventually, the class action plaintiffs and the Foundation agreed to dismiss all claims against each other, including the Foundations’ counterclaims seeking indemnification for legal fees, as an investigation revealed that the plaintiffs would be unable to satisfy any judgment.  The Foundation then filed suit, seeking to recover the $4.6 million it paid in legal fees from PIIC under the D&O policies.

PIIC moved for summary judgment on the bases that the claims were either excluded under the policy or that the Foundation failed to meet certain conditions precedent.  Notably, the Court rejected PIIC’s argument that the art authentication services were excluded as “professional services,” finding an ambiguity in the way the policy listed and described what a professional service was.  The Court likewise rejected the remaining PIIC arguments and denied the motion.

If you would like more information, please write to Mike Bono at .