Depreciation

In the fall of 2006, Steve Wynn put his elbow through Picasso's Le Rêve. Restoration was put at 90,000 dollars, but he claimed 54 million from his Lloyd's insurers for lost value: in his view, the canvas had fallen from 139 to 85 million. In fine art and valuables insurance, depreciation is the loss of value that remains after a damaged item has been restored. A restored work, even in the best hands, never quite recovers its prior value. The market pays a premium for integrity and penalizes any impairment, however well repaired. Policies in the class therefore cover this residual loss explicitly. In the event of partial damage, the insurer pays the restoration cost plus the depreciation remaining after it, within the limit of the insured value. Some wordings cap this item, for example at 10% of the sum insured. Paying for loss in value after repaired damage is one of the technical signatures of fine art insurance. The contract can pay for the restoration, then pay again for the value lost despite it; it cannot give the object back its original integrity. Depreciation has to be assessed by an expert, and it is a classic point of contention between insurer, policyholder and restorers.