Ron Perelman’s Fight Over $410 Million in Art Insurance Goes to Trial

Nearly seven years after a fire ripped through Ron Perelman’s Hamptons home, he is asking a New York state judge to force insurers to pay him more than $400 million for five paintings he says were damaged in the blaze.

A trial kicked off today in lower Manhattan over a lawsuit Perelman filed two years after the fire. In the suit, he claims that affiliates of Lloyd’s of London Ltd., Chubb Ltd. and American International Group Inc. issued policies that “protected one of the largest private modern art collections in the world from any damage, no matter how slight” — but balked when he sought compensation for the most expensive pieces in the residence. Those included works by Andy Warhol and Cy Twombly.

The case is a rare peek behind the curtain of high-stakes art collecting, as well as an unusual glimpse into the disputes between wealthy collectors and their insurers, many of which are contested privately to keep the intimate details of their holdings from the marketplace.

The trial — where testimony from Citadel founder Ken Griffin may be played — is also likely to shed light on the current wealth of the 82-year-old Perelman, once touted as America’s richest man before his fortune declined in recent years. The business most closely associated with him, Revlon Inc., filed for bankruptcy in 2022. The court case revealed that he sold art worth nearly $1 billion after shares of the company he was using as collateral plunged and lenders demanded payment.

Perelman’s lawyer C. Bryan Wilson said in his opening argument Monday that the policies let his client claim the full value the insurers agreed to pay for the works — many times their market value — even if there was nominal damage to them. He said the insurance companies were “more than happy” to accept Perelman’s premium payments.

‘Raining Inside the House’

“It was effectively raining inside the house” as firefighters tried to put out the blaze, and the five works were moved repeatedly on a cool, damp night and sat in high humidity for more than 12 hours, Wilson told Justice Joel M. Cohen, who is overseeing the trial without a jury. Wilson said the insurers paid for more than 30 artworks damaged in the fire, about 11 of them on the same floor where the contested works were hanging.

Related: Perelman Sold Art by Picasso, Basquiat to Repay Banks $1 Billion

They “came to regret” the deal they had struck with Perelman, he said, and “decided to draw a line in the sand.”

The insurers say the lawsuit is a “money grab” contrived by Perelman to extract a payout for paintings he can’t prove were damaged. They question his account that he never considered selling the artworks and note that two pieces later bought by Griffin were hanging near the other five works when the fire occurred. Trying to sell the art might suggest Perelman didn’t think it was harmed. Though Griffin isn’t a party in the case, his testimony is part of the evidence, and portions of his deposition may be played at trial.

In his own opening statement, Jonathan Rosenberg, an attorney for the insurers, told the judge the disputed claims were filed when Perelman began to have “serious financial difficulties” and was facing margin calls from his lenders, noting his art sales.

‘Kitchen Sink’

“He throws the kitchen sink at the claim,” Rosenberg said. “He will admit he wasn’t aware of any actual damage to the paintings at the time the claim was made, because it was a financially driven claim.”

The Perelman case is notable “because of the scope of the damage to the entire collection and the profile of the collector,” said Judith Wallace, a managing partner at Carter Ledyard & Milburn and chair of the firm’s art law department. “He’s also known to be a tough and well-funded adversary, so you sort of know that there will be pretty strongly advocated positions on both sides.”

Wallace said insurance policies at the heart of such legal fights typically have dispute resolution clauses that allow for a proceeding similar to an arbitration that can’t be reviewed by a court.

“It’s reviewable only by a very demanding standard, requiring fraud in the proceeding itself,” she said. “They’re very difficult to overturn.”

Plunge in Wealth

Perelman’s holding company, MacAndrews & Forbes Inc., has owned various high-profile brands, including Marvel, Coleman and New World Entertainment. Today it owns stakes in two small biotechnology firms and Vericast, a check printing and financial solutions business that underwent a distressed debt exchange last year. His wealth was estimated at $19 billion by the Bloomberg Billionaires Index in 2018 but had fallen to $3.3 billion by the time his calculation was discontinued in 2021.

The trial is expected to last about three weeks and feature witnesses including Perelman himself and a Brooklyn man who made the frames for the paintings. Also scheduled to take the stand are Jennifer Maas, a chemist and expert in the scientific analysis of fine art who will testify for Perelman, and Marion Mecklenburg, a conservator and engineer, for the defense.

The $410 million battle stems from a fire that broke out in the attic of Perelman’s Hamptons estate, the Creeks, in September 2018, which damaged the residence and destroyed art and furniture. Insurers paid out more than $100 million in the aftermath.

But the five contested works, enclosed in glass-like frames and removed from the residence with no initial signs of damage, weren’t included in the 2018 claim, although staff told insurers they were being monitored. They were rehung at the Creeks the following summer.

The paintings were insured for many times their market value so 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. Unlike many insurance policies that cover the cost of repair, Perelman’s policies allow him to exchange damaged artwork for its full value.

For example, one of the paintings in dispute, 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 case is AGP Holdings Two LLC v. Certain Underwriters at Lloyd’s of London, 654742/2020, New York State Supreme Court, New York County (Manhattan).

Photo: Staff members next to a work by Ed Ruscha entitled “Standard Station 1966” at the British Museum in London. The painting is in Perelman’s collection. (Bloomberg)