Christie’s Fine Art Storage Services, Inc., the art warehousing subsidiary of the leading auctioneer company, Christie’s, has succeeded in obtaining a dismissal of negligence and breach of contract claims asserted by the property insurer of a trust which owned the extensive art collection of a deceased wealthy member of the Rothschild banking family. The art collection, which was stored on the first floor of the Brooklyn warehouse owned and operated by Christie’s storage arm, had been substantially damaged in Superstorm Sandy when flood waters from the storm surge flooded substantial sections of New Jersey and New York, including Brooklyn.
The subrogated insurer, AXA Art Insurance Corp., brought suit against CFASS in New York County Supreme Court. In addition to negligence and breach of contract claims, AXA asserted that the defendant was grossly negligent when it left its insured’s fine art collection on the ground floor of its facility despite advance warning of Sandy’s potential for severe flooding, and, had negligently misrepresented to its customers days prior to the onset of Sandy-caused flooding that it was taking proper steps to move their possessions to upper floors of the warehouse when, in fact, it took no such steps.

Attorneys for CFASS convinced the trial court judge to dismiss AXA’s claims based upon a “lost damage liability,” or LDL, waiver contained in the storage contract, pursuant to which AXA’s insured agreed to not only release CFASS from “all liability for physical loss or damage” to the art collection, but also to obtain its own coverage for such loss or damage, and , to notify its insurer of the existence of the waiver and to see to it that the insurer waived any right of subrogation. Although there was no express waiver of subrogation contained in AXA’s policy, the trial court judge ruled that the storage contract provisions operated as a waiver of subrogation which was legally binding on the property insurer.

Interestingly, in a case before the same New York Court brought by the property insurer for the estate of American Artist LeRoy Neiman, whose art collection was damaged at the CFASS facility by Sandy’s floodwaters, the trial judge noted with interest that the Neiman estate had specifically contracted for storage of the collection in a particular climate controlled second floor unit and, in fact, had been billed for storage in that unit, but the collection had actually remained on the ground floor loading dock area of the CFASS facility. The court has not yet issued a ruling in this case, while AXA has filed an appeal of the Order of Dismissal in its case. The two cases are AXA Art Insurance Corp. et al. v. Christie’s Fine Art Storage Services, Inc., Case No. 652862-2013, and, StarNet Insurance Co. v. Christie’s Fine Art Storage Services, Inc., Case No.159899/2013.

These and other cases still winding their way through the various courts make clear that although the flood waters from Superstorm Sandy may have receded and much of the debris left by the storm surge cleaned up, the financial effect on those who suffered substantial damage in the storm, and their insurers, has yet to be finally realized.