SANTA MONICA : Art Owners Sue Insurers Over Quake Damage Claim

A Santa Monica couple who thought they had insured their multimillion-dollar art collection have sued an Encino insurance agency and a giant insurer for failing to pay a $2.5-million claim for earthquake damage.

Gary and Donna Freedman, whose collection includes a $2.3-million Roy Lichtenstein oil painting titled “Expressionist Head,” filed the lawsuit in Los Angeles Superior Court last week. The suit alleges that American Business Insurance Brokers Los Angeles Inc. sold them an all-risk policy for their collection of paintings and ceramics through Fireman’s Fund Insurance Co., which has refused their claim.

At issue is whether the policy excluded earthquake damage.

Fireman’s Fund and American Business officials have declined to comment on the lawsuit. Both companies are defendants in the suit, which alleges negligence, bad faith and breach of contract.

The Freedmans said they were surprised when Fireman’s Fund denied their claim to cover 15 pieces of their collection.

Gary Freedman, a Santa Monica attorney, said the 5-by-6-foot Lichtenstein painting suffered several scrapes and irreparable damage to its canvas when the wire from which it was hanging broke during the Northridge earthquake.

“It’s impossible for me to express the feeling I had on that Saturday when they told me I had no coverage,” Freedman said. “It’s outrageous to me what they’ve done.”

According to the lawsuit, Freedman called his broker at American Business and was told that his policy did include earthquake damage. The agency sent a letter to Fireman’s Fund stating as much.

Nevertheless, on March 1, Fireman’s Fund denied the claim, the lawsuit states. Freedman said he was told by the company that an amendment had been added which excluded earthquake damage.

Freedman said American Business apparently discovered a copy of the amendment to the 1992 policy in their files when the dispute erupted. Freedman contended that he had never been told it existed until after he sued.

“We don’t have such an exclusion in our copy of the policy, and even if we did, one was never issued with the 1994 policy,” said Bruce A. Friedman, an attorney representing the couple.

Friedman said the couple switched insurers in 1992 from Lloyd’s of London after an agent from American Business told them they could acquire a better policy.

The Freedmans describe the conduct by Fireman’s Fund in their lawsuit as despicable, malicious, fraudulent, oppressive and outrageous for failing to pay. They accuse American Business of negligence for selling them a policy that was substantially different from their previous policy with Lloyd’s of London, which covered quake damage.

The Freedmans are also seeking an unspecified amount of punitive damages.

Gary Freedman said he and his wife purchased the Lichtenstein painting from a New York art dealer for $75,000 in 1980, when it first came out.

Over the years, the painting’s value grew, as have many pieces by Lichtenstein, whose works have been auctioned for as much as $6 million.

Freedman said he has had the painting, which he describes as the centerpiece of his $3.2-million art collection, insured for 13 years.

“You’re thinking, ‘Thank goodness I have insurance for my valuable possession,’ ” Freedman said. “Then to be told that you don’t. . . . It’s a big loss.”