The Wall Street Journal had a story ($) today about a Federal court decision in the Northern District of Illinois holding that an "all risk" insurance policy covered the conversion by a gallery of artworks consigned to it by the policyholder. (I couldn't find a copy of the decision online or on Westlaw. UPDATE: see below.)
According to the Journal, the plaintiffs consigned 11 paintings to Chicago dealer Richard H. Love, which he then sold and kept the proceeds. Since Love was apparently judgment-proof, the plaintiffs filed a claim under their insurance policy. The insurer denied coverage, but the court held that the loss was indeed covered: "There can be no doubt that the Gallery's unauthorized sales deprived plaintiffs of their property."
The Journal hypes it as a very big deal -- the huge four-column headline screams, "This Insurance Case Could Shake Up the Art Market," and the article claims the case "may well have a ... dramatic impact on the art world ... in terms of how high-echelon paintings, sculpture, antiques and other tangible assets such as silver, jewelry and china are bought and sold in the U.S." -- but I'm not sure I see it. Won't the insurance companies simply amend their future policies to make it clear this kind of loss is not covered?
UPDATE: Terry Martin comes through again. He's posted a copy of the decision here.
UPDATE 2X: The Insurance Coverage Law Blog doesn't see what all the fuss is about either.