Fair market value of an artwork
Price at which a work would sell in its market on the day of the loss, the settlement basis for art policies that have not agreed a value in advance.
A destroyed painting can be priced at its last sale, at an insurance appraisal, or at what a dealer would ask for it today. Experts distinguish several bases. Market value is the likely sale price on the secondary market, which the policy applies when no value has been agreed. Replacement value, higher, is the price of buying it again from a dealer, commissions and costs included. Fair value, used in accounting, tracks comparable sales. The gap between hammer price and gallery price comes from the buyer's premium and the dealer's margin. The art market moves fast. A painter whose prices double in three years leaves the owner under-insured if the policy is not revalued, while a painter out of fashion may be worth less than declared. The loss adjuster looks at comparable public sales, condition and provenance. An agreed value in the contract avoids that debate.
Textbook case: a landscape from 1910 is destroyed in a fire. With no agreed value, the adjuster takes three public sales from the last two years, between 380,000 and 510,000 euros, and settles at 440,000 euros. The owner argues a gallery would sell it for 600,000 euros, a replacement value his policy did not provide.
fair market value, art replacement value, market value of art, retail replacement value
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