The adjuster is misreading the endorsement. The provision for newly acquired fine arts applies to art the insured acquires during the policy period, after existing art is already scheduled. It's easier with an example. An insured buys a policy and schedules a $40,000 painting. Six months later, the insured acquires another painting worth $15,000. The insured has a fire a month later. Since the $40,000 was on the policy from the beginning, that is settled for the full amount shown in the schedule. The new $15,000 painting is newly acquired since it wasn't on the policy at inception, so that is covered at actual cash value, but no more than 25% of the amount of fine arts scheduled, and the insured must have reported the new object within 90 days of acquisition, and paid the additional premium. 

Here's the wording, emphasis mine: 

B. Newly Acquired Fine Arts
When Fine Arts are scheduled, we cover objects of art acquired during the policy period for their actual cash value. However, we will pay no more than 25% of the amount of insurance for fine arts scheduled. For coverage to apply for newly acquired fine arts, you must:
1. Report these objects to us within 90 days; and
2. Pay the additional premium from the date acquired

A new policy with fine arts scheduled is not newly acquired fine arts; that's just a new policy. For art to be considered newly acquired, it must be purchased after the policy has been in force. If a policy is effective March 1, any art scheduled at that time is not newly acquired. However, for that March 1 policy, if the insured buys another painting on March 15, that work is newly acquired because it's after the inception date, and the newly acquired provisions would apply.

Any artwork that wasn't scheduled would indeed fall under the regular personal policy provisions.