Frelinghuysen Morris Foundation (FMF) was established to house the unsold collection of American abstract artists L.K. Morris and Estelle “Suzy”

Frelinghuysen, who died in 1975 and 1988, respectively. Since 1995, the trust had consigned with the Salander-O’Reilly Galleries to occasionally display these paintings for exhibition and/or sale. FMF filed an insurance claim for its estimated $2.1 million in losses from the gallery’s sale of 41 paintings, from which it did not receive any proceeds. AXA Insurance denied the claim, stating, among other reasons, that the circumstances did not constitute a fortuitous physical loss of artwork and that, since the art was seized by the New York State Court, claims for it were excluded under the $30 million policy in question.

CASE QUESTIONS

1. Does the ownership of artwork create an insurable interest?

2. If artwork is given to an art gallery to display and sell on behalf of the owners, and then the gallery commits fraud against the art owners, does this fraud create an insurable interest?