Related Practices
3 Insurance Issues Raised by the Notre Dame Cathedral Fire
Insurance Law360May 15, 2019
By Peter Kelly Golfman, Alexander Cogbill and Gabrielle Siskind
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On April 15, 2019, a massive fire devastated the Notre Dame Cathedral in Paris, France. The 850-year-old cathedral graces the city center and is visited by over 14 million people a year. While the cathedral’s main structure and many of its most precious artifacts were saved from the blaze, one of its spires collapsed and two-thirds of the cathedral’s roof was destroyed.[1] Although the full extent of the damage is yet unknown, early reports indicate that rebuilding Notre Dame will cost billions of dollars as architects, historians and artisans work to preserve the medieval landmark.
The catastrophic fire at the Notre Dame Cathedral raises some interesting insurance-related issues, including (1) the availability of insurance coverage for the damage to this historical building; (2) how to assess the physical damage to such a unique structure in the event there is insurance coverage; and (3) how to determine the value of historical relics and artwork inside the cathedral.
What Insurance, if Any, Covers the Cathedral?
It may be surprising to many that there is no direct insurance covering the Notre Dame Cathedral. Rather, the centuries-old church is owned and self-insured by the French government, which allocates nearly €350,000,000 each year towards the upkeep and repair of state-owned monuments including Notre Dame.[2] Following the fire, there has been an outpouring of support from private individuals and corporations, with pledged donations surpassing more than a billion dollars.[3]
While these contributions are a start, the initial estimates to repair the damage total more than €10,000,000,000. And, given French President Emanuel Macron’s pledge to rebuild the cathedral in five years for the 2024 Olympics, the question remains how to fund this effort.[4] This is a shortfall that France, through self-insurance, may not be able to shoulder.[5]
Despite the fact that there was no property insurance coverage for the building itself, there are potential claims against third-parties and their insurance providers. An obvious target is the contractors who had been renovating the cathedral at the time of the fire.[6] If it is determined that the contractors were negligent in some way, such as in their oversight of the renovations, they would likely bear some responsibility for the damage.
Another potentially responsible party is the Catholic Archdiocese of Paris, which is responsible for the landmark’s upkeep, administration and operation.[7] Because the fire occurred under their care, it is possible that the French government would look to them, and their insurance carriers, for contribution.
Finally, recent reports indicate that an “electrical short-circuit” may have caused the fire or at least delayed a relay of crucial alarms to the firefighters arriving at the scene.[8] Therefore, the entity responsible for the electrical wiring in the church may be liable for the damage.[9]
Despite the potential liability these third parties — and their insurance carriers — may face, third-party insurance coverage is unlikely to amount to the billions of dollars needed to repair the damage. For example, Brazil continues to seek funding to rebuild the Brazilian National Museum which was destroyed by a fire in 2018. As salvage efforts continue,[10] Brazil is attempting to crowd fund the repair[11] and may need to resort to a loan from the World Bank, reportedly on the condition that they relinquish control of the museum entirely.[12]
Complications in Assessing the Physical Damage to the Cathedral’s Structure
As the potential claims against third parties and their insurers play out, it will be necessary to determine the extent of physical damage to the cathedral’s structure and the costs of repair or replacement. Rebuilding a centuries-old landmark is difficult and expensive because the goal is to preserve the original character of the building, not just replace it. As a result, unique properties, such as Notre Dame, are incredibly hard to value. Although Notre Dame was self-insured by the French government, looking to caselaw that discusses the insured value of unique properties is useful.
As an initial matter, many property policies provide either replacement cost or actual cash value coverage. Replacement cost coverage provides the insured with the cost to repair or replace damaged property, typically with materials of like kind and quality, without any deduction for depreciation.[13] Actual cash value policies, on the other hand, account for depreciation and simply measure the value of the property as it existed before the loss.[14]
In determining actual cash value, some courts have noted that churches, hospitals, clubhouses and other similar structures are “seldom traded,” and thus often lack a “market price.”[15] In this regard, courts have “recognized that properties of this character can be unique and have permitted them, once it has been established that market value is an unworkable tool, to be valued as specialties on the basis of reproduction cost less depreciation.”[16]
Similar difficulties are faced when assessing a unique structure’s replacement cost. For example, the National Presbyterian Church in Washington, D.C. sustained damage after an earthquake in 2011.[17] The church carried a property policy which provided that the “property” can be “repaired, rebuilt or replaced ... with other property of like kind and quality.”[18]
The church’s exterior was comprised of hundreds of limestone panels, some of which were cracked or otherwise damaged by the earthquake. The church filed an insurance claim to repair the damage, but feared that merely replacing the damaged panels would diminish the aesthetic qualities of the façade, as the new, unweathered panels could have noticeably different coloration than the remaining panels.[19] Thus, the church argued that its insurer was required to pay for repairs that not only fix the structural damage, but also create a matching façade.[20]
Ruling for the church, the court determined that in the context of that claim, “property of like kind and quality” was ambiguous, as it could be read to mandate property that looks the same, and thus, the insurer was required to pay for the cost of restoring the church with a matching façade.[21]
Placing a value on Notre Dame will certainly involve some of these same considerations. Like other properties of historical and cultural significance, the cathedral lacks a “market price,” and the repair or replacement cost must take into consideration the many unique structural qualities that make Notre Dame a French landmark.
Another wrinkle in valuing historic properties such as Notre Dame is the importance of understanding the structure’s history. The cathedral was built and rebuilt throughout the centuries. Incorporating overlapping architectural influence from each era makes valuation even more difficult, and replicating that character is nearly impossible.[22] For example, Notre Dame was officially finished in 1345, and over the years several alterations have been made. The iconic rose windows were inlaid into the building’s facade between 1225 and 1260.
Later, in the 16th century, the Huguenots stormed the cathedral and damaged the building. In the 1700s, the cathedral’s spire was removed and rebuilt, and in the 1900s, gargoyles were fashioned as part of another restoration.[23] All of these historical factors have an impact upon valuation.
Insurers that provide coverage for historical structures will often provide specialized valuation clauses. For example, one such endorsement reads:
The following is added to the Replacement Cost Valuation clauses in the above forms. It applies only to direct loss or damage to covered buildings with historic value. Such direct loss or damage to covered historic property must arise from a peril covered by a form attached to this policy. This valuation clause applies to any other applicable direct damage coverage forms, but only as respects the historic property's building coverage. It does not apply to other valuation provisions, nor does it apply to covered property other than buildings.
VALUATION
If a building that is generally recognized as having historic value suffers a loss or is damaged, we will repair or replace the damaged areas with the same materials, workmanship and architectural features provided they are reasonably available. In the event that such materials, workmanship and architectural features are not reasonably available, we will repair or replace with materials, workmanship and architectural features that most closely resemble those that existed before the loss or damage occurred.
For purposes of this endorsement, historic value means that the property depicts or represents a designated period of history of human activity in the community where the property is situated, and that such property was originally built or produced during the period that it depicts or represents. Later representations built or produced to depict or represent such a period are not considered to have historic value and will not be considered as historic property.
Also, for purposes of this endorsement, historic property means any property listed in a Federal, State, County or Municipal Historic Register. Historic property shall also mean any property constructed or produced prior to the year 1940 if it has historic value to the community in which it is situated.[24]
The National Trust for Historical preservation also provides a unique policy with liberal valuation provisions to allow for replacement of unique historical items.[25] However, these policies and endorsements tend to demand high premiums due to the limited ability of insurers to pool the risks of similarly situated insureds. With assets as unique as Notre Dame, that market for such insurance is quite small, and coverage is often cost prohibitive.[26] Nevertheless, in the wake of this highly public disaster, owners of these properties may reevaluate the need for some form of insurance.
Complications in Assessing the Damage to the Cathedral’s Contents
Not only does valuation of Notre Dame require an appraisal of the physical structure, but it also requires placing a value on the collection of holy relics and artwork that reside in the cathedral. The latter task can be particularly challenging, as Notre Dame houses some of the rarest artifacts in the world, including some of the cathedral’s stained glass rose windows and the 8,000-pipe great organ that dates back to medieval times.[27]
However, unlike the building itself, it has been reported that there is insurance covering some of the artwork within the church.[28] Notably, that insurer has specific insurance products designed to provide coverage for “precious objects and collections as diverse as antiques, contemporary art, old masters, classic cars, porcelain or fine wine.”[29]
While insurers cannot replace unique artwork, insurance payouts for damaged artwork do occur. For example, when a fire destroyed works of Claude Monet and Georges-Pierre Seurat in 1958, insurance reportedly honored the claim paying $300,000.[30] It has also been reported that when 200 objects in the Maritime Museum on L’Ile de Tathou in France were destroyed when lighting struck the building in 2017, insurance coverage responded to the loss.[31]
Recognizing the complexity of valuing a diverse collection of pieces, France has assembled a team of 30 specialists in sculpture, stained glass, fabrics, painting, frames, ancient instruments and more, in the aftermath of the fire. These individuals will assess the condition of the potentially damaged treasures and restore the cathedral’s damaged altar.[32]
Nevertheless, the task of placing a price tag on a “priceless” piece of fine art is “inherently subjective.”[33] As the U.S. District Court for the Northern District of Illinois explored in Fletcher v. Doig, items’ value is easily distorted by the limited size of the market, to the extent there is a public market at all. Even though there is precedent for the value of stained glass,[34] there are likely many other items in Notre Dame that were damaged or destroyed for which there is no market. How these lost items are authenticated and valued will present a challenge rivaling the reconstruction of the cathedral itself.
Conclusion
While the Notre Dame fire was devastating, it provides a rare opportunity to consider the implications of insuring a truly rare historic landmark. The necessary assessments of Notre Dame’s structure and its contents may require scrutiny of several potentially applicable policies. Any analysis will apply both to the extent of the damage,[35] any preexisting wear and tear,[36] and whether certain cathedral components are covered under the applicable policies or are part of the uninsured structure.
The Notre Dame fire is a reminder of the vulnerability of ancient structures to common causes of loss, such as fire, and the myriad of factors that owners and insurers must consider when insuring national treasures. Among these considerations is the complexity of valuing a unique physical structure and the costs in restoring such buildings to their original character, rather than just replacing them, should a loss occur. While the demand for policies insuring such risks may increase following this tragedy, the difficult considerations in evaluating such risks and the outsized exposure will likely continue to make this insurance price prohibitive to all but a select few.
Peter Kelly Golfman, Alexander Cogbill and Gabrielle Siskind are associates at Zelle LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://www.huffpost.com/entry/france-billionaires-donate-700-million_n_5cb640f3e4b082aab08dbc0e
[2] https://fr.euronews.com/2019/04/17/notre-dame-qui-doit-payer-pour-la-restauration.
[3] https://people.com/travel/1-billion-donated-to-notre-dame-in-two-days-after-massive-fire-ravaged-paris-cathedral/; France-KLM is also offering free flights to those assisting with the restoration. https://www.lonelyplanet.com/news/2019/04/19/air-france-free-flights-notre-dame/
[4] https://www.thelocal.fr/20190418/can-notre-dame-really-be-rebuilt-in-time-for-the-2024-paris-olympics
[5] https://www.nytimes.com/2019/04/20/world/europe/notre-dame-france-monuments.html
[6] https://www.bloomberg.com/news/articles/2019-04-17/france-s-axa-insured-notre-dame-artwork-two-construction-firms
[7] https://www.washingtonpost.com/religion/2019/04/15/fire-notre-dame-catholic-icon-was-made-even-more-heartbreaking-by-timing/?utm_term=.ce4eaeb76b6f
[8] https://www.dailymail.co.uk/news/article-6939345/Macron-meets-officials-eyes-Notre-Dame-legacy-building.html; https://www.cbsnews.com/live-news/notre-dame-cathedral-fire-cause-computer-glitch-rector-today-2019-04-19-live-updates/
[9] Like Pacific Gas and Electric, such claims could result in bankruptcy. https://www.nytimes.com/2019/01/29/business/pge-bankruptcy.html
[10] https://www.smithsonianmag.com/smart-news/these-are-latest-updates-brazils-devastating-national-museum-fire-180970232/
[11] https://www.theartnewspaper.com/news/national-museum-in-rio-starts-rebuilding-efforts-with-temporary-exhibitions; https://benfeitoria.com/museunacional.
[12] https://www.economist.com/leaders/2018/09/08/lessons-from-the-destruction-of-the-national-museum-of-brazil
[13] See SR Int'l Bus. Ins. Co. v. World Trade Ctr. Properties LLC, 2006 WL 3073220, at *1-2. (S.D.N.Y. Oct. 31, 2006), opinion clarified, WL 519245 (S.D.N.Y. Feb. 16, 2007) (holding that under replacement cost policies, “the most the Insureds [could] recover … [was] the amount it would cost to reproduce the WTC beam-for-beam, pane-for-pane, as it stood” before the loss).
[14] Id. at *2.
[15] Rochester Urban Renewal Agency v. Patchen Post, Inc., N.Y.2d 1, 6 (1978).
[16] Id. at 9 (explaining that such method has no relationship to market value and is an entirely different technique for determining “just compensation”); see also Gen. Cas. Co. v. Tracer Indus., Inc., 285 Ill. App. 3d 418, 427 (1996) (explaining that market value does not work when items, such as churches and schools, which can be unique, are not regularly bought and sold).
[17] National Presbyterian Church, Inc. v. GuideOne Mutual Insurance Company, 82 F. Supp. 3d 55 (D.D.C. 2015).
[18] Id. at 59.
[19] Id.
[20] Id.
[21] Id.
[22] https://www.express.co.uk/news/world/1116459/Notre-Dame-fire-was-notre-dame-insured-how-much-raised-fire-repair
[23] http://time.com/5571019/notre-dame-cathedral-fire-history/
[24] https://www.markelinsurance.com/~/media/specialty/agents-sales-materials/forms/mcp034.pdf?la=en
[25] https://nationaltrust-insurance.org/
[26] https://www.apnews.com/bb15f3d71d0d4a34aaa71a498073baea
[27] https://www.vox.com/the-goods/2019/4/16/18410667/notre-dame-fire-paris-tourism
[28] https://www.reuters.com/article/us-france-notredame-axa/axa-provided-insurance-cover-for-notre-dame-artworks-for-a-few-million-euros-idUSKCN1S01ZZ
[29] https://www.axa-art.com/what-we-insure
[30] https://www.thedailybeast.com/the-moma-fire-that-destroyed-a-coveted-monet-painting; https://www.newspapers.com/clip/615393/valuable_painting_ruined_in_fire/
[31] https://www.smithsonianmag.com/smart-news/200-objects-damaged-after-lightning-sets-fire-french-museum-180964211/; http://normandie.canalblog.com/archives/2017/07/21/35494583.html
[32] https://www.vox.com/the-goods/2019/4/16/18410667/notre-dame-fire-paris-tourism; https://einsurancenews.com/2019/04/18/insurance-adjuster-reports-90-of-notre-dame-cathedral-treasure-saved-from-fire/
[33] Robins v. Zwirner, 713 F.Supp.2d 367, 374 (S.D.N.Y. 2010); Fletcher v. Doig, 196 F.Supp.3d 817, 826 (N.D.Ill. 2016) (citing Horowitz, Price Fixing the Priceless? Discouraging Collusion in the Secondary Art Market, 66 HSTLJ 331 (2014)).
[34] https://www.telegram.com/news/20171209/questions-surround-marketing-of-notre-dames-stained-glass
[35] https://www.newscientist.com/article/2199991-notre-dames-stonework-isnt-flammable-but-may-be-structurally-damaged/
[36] https://www.smithsonianmag.com/smart-news/notre-dame-desperate-need-repairs-180964719/ (documenting disrepair prior to 2019); https://www.wsj.com/articles/decades-of-neglect-threatened-notre-dame-well-before-it-burned-11555624252
