Learning Outcome 6 (20 marks)

You are a claims handler for an insurer. One of your insurer's policyholders, Paul, has insured a piece of artwork under an agreed value insurance policy for the sum of 120,000. This agreed value is based on an expert valuation carried out in 2015. The policy has been renewed annually, with no subsequent change to the agreed value being advised to the insurer.

In 2021, the artwork suffered extensive water damage. Paul did not think it could be properly repaired due to its extensive damage and wanted the claim settled for the full 120,000. The insurer insisted that the artwork was repaired.

The artwork was repaired but not all the original paint colors could be replicated. An expert in valuing art, stated that in its repaired state the piece is now only worth 100,000. However, if it had not been damaged its value would now be 150,000. Paul argues that he should be given a cash payment of 20,000 to allow for the loss of value.

Question:

Discuss, citing relevant case law, the basis of indemnity and settlement for the artwork. (20 marks)