Art Collectors’ Insurance Bad Faith Claim

Posted September 15, 2014

Insurance claims for artwork can pit homeowners against big insurance companies. This has been amply illustrated by a case in Pennsylvania’s U.S. District Court. After theft and arson at his home, an art owner has been seeking redress from his insurance company. Now, according to the federal court ruling, the plaintiff can add a charge of ‘bad faith’ to his complaint.

Timothy Kump, the plaintiff, has been in a long battle with State Farm over his $2 million policy. The insurance company has refused to pay the entire claim, although Kump has attempted to prove that his losses are well over the $2 million mark. U.S. District Judge Mannion, who serves Pennsylvania’s Middle District, ruled that Kump has the right to sue State Farm for ‘bad faith’ due to the nature of its claim investigation techniques.

The insurance claim was set in motion by a 2010 burglary and fire that decimated Kump’s collection. He asserts that he had millions in famous artwork, maps and coins. Among his collection, Kump claims Picasso sketches worth $3 million were stolen or destroyed. Etchings by Rembrandt, also lost, are said to be worth more than $100,000. He also asserts that he lost $4.8 million worth of gold coins.

State Farm did pay $440,000 per a homeowner’s policy. It also paid another $375,000 per a personal articles policy. However, the insurance company disputed further payments. Utilizing research from its own investigation, the company asserted that artwork authentication was inadequate and used this assertion to deny the final claim.

Originally the case was filed in a county court. Claiming diversity jurisdiction, State Farm petitioned to move the argument to a federal court. Kump’s lawyers raised the ‘bad faith’’ issue when filing supplemental briefs. These challenged the validity of the State Farm investigation as the basis of denying compensation.

Kump asserts that the insurance company conducted a biased investigation. As proof, his complaint points to witness intimidation and failure to conduct proper legal research. Other indications of bias, according to Kump’s suit, included the way the company ignored verifiable evidence that was favorable to the plaintiff.

The ruling isn’t a final victory for Mr. Kump, but it does represent a chance to fight the insurance company’s methods in open court. If nothing else, it may offer leverage that could lead to a favorable settlement.