Ripped from the headlines – a wealthy art collector reports anoriginal Picasso painting stolen. The FBI initiates a search forthe criminals, the press speculates on who might have stolen such ahigh-valued work, and the insurance company has the difficult taskof reimbursing their insured for lost value.

Fine art appraisers specializing in insurance claims aresometimes called upon to help establish value for those items thatare often referred to as “priceless.” The logical question thenbecomes, “How do you value irreplaceable, ‘priceless’ works ofart?”

The answer is simple in theory and difficult in practice; whilemost works of art are in fact irreplaceable, almost everything hasa value. For appraisers, that value is most often determined bycomparing like kind and quality items that are for sale or haverecently sold in the market.

To elaborate, let's take the example of the stolen Picassodiscussed here. While these paintings are definitely irreplaceable,they are not necessarily “priceless.” Because Picasso’s paintingsand paintings by other high-caliber artists are often traded in theauction market at Sotheby’s and Christie’s, prices for thesepaintings are established semi-frequently in the market and becomea basis of value for these particular artists’ work.

To value the Picasso, we would compare the insured’s painting toother Picasso paintings which have sold at auction. To completethis task we would consider the year of creation, canvas size,subject matter, medium, style of painting, and other determiningfactors which would affect value. We would not directly compare aPicasso Cubist abstract to a Picasso Blue Period portrait for avalue. Instead, we would compare like kind and quality works aswell as how the market is currently responding to Picasso paintingsin general. When Picasso’s Nude, Green Leaves, and BustCubist painting broke an auction record in 2010 for $106.5 million,it set the standard of value for other Picasso Cubist still lifepaintings.

This scenario holds true with other seemingly pricelesspaintings by masters such as Van Gogh, Monet, and the like. As longas there is an auction market for an artist’s work, a price can beestablished. It is often the case that private dealers and realizedauction prices are very similar. This is particularly true ofhigher end art.

However, a work that has come up at auction over and over againand has been seen frequently by the public may be considered“stale” and not as valuable in the short-term as a work that hasrarely been seen. For this reason, it is also important to have anawareness of the recent visibility of both the subject propertypiece and the works to which it is being compared.

Appraising high-end art is challenging, especially in the eventof a loss and damage insurance claim. If the piece was damaged, anadjuster will often ask for help to secure restoration estimatesand compare those to the replacement value. If the cost ofrestoration plus the cost of the estimated diminution of value isless than the replacement cost, an item will be recommended forrestoration.

When collector Steve Wynn (the billionaire Las Vegas hotelier)accidently elbowed his Picasso, leaving a silver dollar-sized holein the canvas before trying to sell it, his insurance company wasnotified immediately. Most likely, if the painting was scheduled onWynn’s insurance policy, they footed the restoration bill, raisingthe question as to whether the damage and subsequent restorationaffected the value of the painting. The answer is yes, there wouldbe a diminution in value to the piece in comparison with otherPicasso paintings that have not been restored.

Whether or not a piece has been restored in the past issomething appraisers need to take into consideration; the conditionof these paintings plays a major role in determining value.

Along with condition, provenance also plays a major role in thevaluation. Provenance is the successive history of ownership of awork of art and it is one of the factors that helps establish theauthenticity of a piece. If an important work of art does not havea paper trail it can be a red flag.

While appraisers are not authenticators, there are a number ofthings they look for to complete due diligence and help establishvalue. Most major artists have a catalog raisonné to reference. Acatalogue raisonné (French meaning “reasoned catalog”) is acomprehensive list of artworks by an artist, describing the worksso that they may be reliably identified by third parties.

Appraisers reference the artist’s catalogue raisonné in searchof the painting being appraised to make certain it is listed. Also,the owners of the painting, if authentic, would most certainly havepurchase documentation, auction house records, previous insuranceappraisals, and/or insurance schedules to accompany their piece. Inthe event the authentication of the piece is questionable, thereare experts to call on for assistance. The estate of the artist orthe artist’s foundation can assist with recommending authenticatorsof their work.

For insureds who are art collectors, it is advisable to havethem schedule their fine art separately on their insurance policywith an accompanying certified appraisal. This appraisal should beupdated every two to four years, since many changes in the marketcan occur in this time period affecting the value of the artwork:the death of the artist, a record-breaking auction sale for theartist, and an increase in the art market in general are allfactors that can increase value.

When dealing with irreplaceable, “priceless” works of art in aninsurance claim, a certified appraiser qualified in the realm offine art can provide invaluable counsel.