“This is more than enough to keep a couple of firms busy and trying to find grounds for denial of coverage,” said Judith Wallace, a partner at Carter Ledyard and chair of the firm’s art practice. “It will be well worth the time to litigate whether a misstatement is material in a dispute of this size.”
Perelman’s counsel said the bid to add the defense is the “latest attempt to distract from the sole issue” of whether the five pieces were damaged in the fire. The insurer group comprises certain underwriters of Lloyd’s of London, Great Lakes Insurance SE, Swiss Re International SE, AIG Property Casualty Co. and Federal Insurance Co.
“Even if the gallery showed Mr. Griffin the Twombly and Mr. Perelman knew about the visit, or if other members of Mr. Perelman’s staff made inquiries related to the possibility of selling the five artworks, that does not show that any of the five artworks was offered for sale,” Perelman’s lawyers said in a May 2 filing.
The insurers, whose own expert found no evidence the artworks were damaged in the fire, say Griffin’s testimony is “highly relevant.”
It speaks to whether Perelman treated the paintings as damaged or offered them for sale as normal and then “opportunistically presented for an insurance payment based on purely financial consideration,” they said in court documents.
The dispute is the latest headache for Perelman, who was once considered America’s richest person. He has seen his wealth collapse from $19 billion to $2 billion after the pandemic roiled his leveraged investment empire.
The most notable casualty was Revlon, for which he paid $1.74 billion in 1985. It filed for bankruptcy last year.
Filings show he used his shares in the makeup company as collateral to back the debt of his investment firm, MacAndrews & Forbes. His holding company also received an unusual loan from a family foundation.
All told, at least nine banks had claims against Perelman’s assets, including his art collection, house in the Hamptons and various aircraft, Bloomberg reported in 2020. That year, he sold more than $100 million of art — including a Twombly — as well as a private jet and company stakes.
A spokesperson said at the time they weren’t forced sales; a Perelman biographer viewed them as a sign “he needs cash.”
The current money battle stems from a September 2018 fire that broke out in the attic of The Creeks, which damaged the residence and destroyed art and furniture. Insurers paid out $169 million in the aftermath.
The five contested works, enclosed in plexiglass frames and evacuated by firefighters and staff with no initial signs of damage, weren’t included in the 2018 claim, though staff told insurers they were being monitored, according to court filings. They were rehung at The Creeks the following summer.
But a month after Griffin’s 2020 visit, Perelman sued his insurers for payment on claims covering four of the five artworks. He engaged an expert, who found that the fire had caused abrasions, paint flaking and “accelerated aging and molecular changes” that altered their chemical structure, according to court filings. The painting Griffin had come to view, Untitled, was later added to the lawsuit.
The next year, Perelman testified that he never tried to sell any of the paintings involved in the case.
“The pictures were never made available for sale,” he said. “Those pictures meant a lot to me and my family.” He also said he didn’t want to sell the pictures because he “could have some potential liability” if they had hidden damage.
Perelman testified that the art he’d sold in the years since the fire hadn’t been at The Creeks, so damage wasn’t a factor.
But the two paintings Griffin purchased, Brice Marden’s Letter About Rocks and River 4, were hanging at Perelman’s home near the five other artworks when the fire occurred.
Griffin only found out about the fire after the purchase and later had the works inspected by experts, according to court documents. Ahmed, his spokesperson, declined to comment to Bloomberg on what they found.
Griffin “is not a party to the litigation between Mr. Perelman and his insurance companies,” Ahmed said in a statement. “He has never owned any of the art involved in their dispute. Both parties have access to witnesses with far more substantive knowledge of any pertinent facts than Ken, and he is rightfully annoyed at the petty and harassing behavior of the insurers and their lawyers.”
The paintings were insured for many times more than their market value so that they could be replaced by art of similar quality regardless of whether a collector was planning to sell, according to testimony from a Perelman executive.
Warhol’s Campbell’s Soup Can was insured for $100 million despite being appraised at $12.5 million in 2018, according to a court filing.
“The inconvenience of being deposed” may not matter in this case, Wallace said. “This is a big firm, big-stakes litigation with hundreds of millions of dollars at stake.”
