After Steve Wynn poked the tip of his elbow into Picasso’s Le Rêve last September while showing it to a handful of friends, it was hard not to admire his equanimity. The Las Vegas casino king’s miscue torpedoed a US$ 139 million deal to sell the 1932 portrait to financier Steven A. Cohen. And yet there was Wynn telling the “New Yorker”: “It’s a picture, it’s my picture, we’ll fix it. Nobody got sick or died. It took Picasso five hours to paint it.” Late last week, the source of this calm became clear: Wynn believed he had an airtight insurance claim, and that the underwriters who issued his policy through Lloyd’s of London would rapidly recompense him.
That has not been the case, so Wynn is now suing them in New York’s federal circuit court to settle his damage claim for $54 million, a move that got heavy media play worldwide. Most outlets simply ran with factual wire-service copy, although the truculent New York Post slammed Wynn with the headline “Picasso Klutz Wants $54 Mil” and questioned whether the deal was truly finalized. Granted, at first it seems odd that Wynn can collect US$ 54 million for his clumsiness and keep the restored portrait. Sources close to the Picasso market say he paid roughly US$ 60 million for the painting in 2001. If Lloyd’s were to pay out his claim, Wynn’s net cost for owning Le Rêve, albeit damaged, would be about US$ 6 million (plus five years of inflation, insurance and other costs but minus its marketing value for the casinos where he displayed it and used it heavily as a promotional asset.)
Yet his claim is as legitimate as that of any homeowner whose ball-playing kids accidentally dent the new Lexus. And although many observers viewed Wynn’s lawsuit as a tactical ploy - to pressure the underwriters into caving in at the negotiating table - his lawyer Barry Slotnick says, “Sadly, I think this case is headed to the courthouse.” If that happens, the fact that Le Rêve was damaged rather than destroyed will make the trial particularly interesting, spotlighting the nature of damage appraisal, which is less a science than an art form.
Normally, such cases involve negotiations to determine the artwork’s value before and after the accident. But according to Slotnick, the Lloyd’s underwriters are not contesting the US$ 139 million pre-poke value, because the deal with Cohen had been finalized the previous evening. Thus, only one number is under debate: The current value of the painting. Despite a US$ 90,500 restoration to patch the puncture in Marie-Thérèse Walter’s left arm, Wynn now estimates Le Rêve at US$ 85 million. The underwriters apparently feel it’s worth much more - Wynn reportedly described their payout offer as laughable. What did they offer? That’s not public, because Wynn won’t say, and XL London Market Ltd, the lead underwriters on his policy with Lloyd’s, have likewise declined comment.
Post-accident appraisals have all the hallmarks of rigor – details of expertise and thick condition reports – but like any artwork evaluation they are ultimately just educated guesswork. “The issue with appraisals is that five experts could give you five different opinions and all of them could be in some sense right,” explains Robert Read of London’s Hiscox insurers. “Fair market value is a gray area.” There are no normal depreciations in damage assessment, either, because it depends on factors such as the condition of the painting beforehand, its medium and nature, the severity of the damage and the quality of the restoration.
That said, the claimed damage is immense, almost 40 percent of what Cohen assented to pay. “I’m happy not to be involved in that case, because agreeing on the loss of value is always a problem and the numbers involved are so high,” says one Swiss art-insurance expert, requesting anonymity. “For a Picasso, 40 percent seems enormous to me, unless he had put his elbow right through the face of Marie-Thérèse. Normally it would be more like 20 percent.” Then again, as New York dealer Richard Feigen notes, “The bill for restoration is so high that it implies there must have been extensive damage, which could justify that kind of depreciation.”
One issue that makes the case complicated for the Lloyd’s underwriters is the fact that the two figures Wynn used to generate his US$ 54 million damage claim are hardly comparable. Cohen has bought aggressively in building his collection, consistently offering prices that have left the artworld’s mouth agape. “If you asked 10 appraisers to estimate that painting’s value last summer, none would have said US$ 139 million,” says the same Swiss insurance specialist, a notion seconded by two other Picasso experts. So the US$ 139 million Cohen was prepared to pay does not constitute “fair market value” in the sense that the term is usually used in appraisals. Yet the post-restoration valuation at US$ 85 million presumably is a more classical “fair market value” figure, based on the behavior of a group of “normal” buyers, i.e. classic billionaire collectors rather than hedge-fund kings in the midst of an epic acquisition binge.
It will be interesting to see what value the Lloyd’s underwriters’ appraisers now attribute to Le Rêve. Did they make the case that the damaged Le Rêve is worth more than, say, Picasso’s excellent-condition Garçon à la pipe, which was hammered at a record US$ 105 million at Sotheby’s in 2004? Unless proof suddenly emerges that the contract between Cohen and Wynn was not legally binding at the time of the accident, the underwriters seem to be in a tight spot, victim to the confluence of nasty coincidences and vast wealth.
Perhaps rather than haggling over the claim they should just outright offer to buy Le Rêve and then sell it immediately. If they truly believe the market value is higher than US$ 85 million, this would cut their losses substantially. Or they could hold onto it as an investment. Because, as Amy Cappellazzo of Christie's points out, the incident may have little long-term impact on the portrait’s value: “It’s still Picasso’s Le Rêve. If you blocked off the windows at the Met and turned on a UV light, you would see all kinds of tears and patches and varnishes in the masterpieces.”
Official court documents in the case of Stephen and Elaine Wynn vs. Lloyd’s London, including all supporting evidence.
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