(FORTUNE Magazine) – You may have missed an auction of American Indian art at Christie's on November 29, but a handful of insurance executives and lawyers were watching it eagle-eyed. Reason? Most of the sale items came from Continental Insurance, a company recently bought by CNA, the large insurer controlled by the Tisch family. And behind this unique collection is a bitter legal spat involving Continental, a pair of art experts, and the right-hand man of Continental's former CEO, Jake Mascotte.

In the early 1980s, Mascotte and his protege, Steven Smith, executive vice president in charge of staff at Continental (both left the company after it was sold), engaged Elisabeth Kirsch and her husband, Douglas Drake, as art experts. For over a decade they oversaw Continental's purchase of some $2 million in art, including hundreds of American Indian artifacts.

But art becomes overhead when hard times hit, as they did Continental in the 1990s, and the relationship soured. Though Smith denies it, Kirsch says Smith began treating her in an insulting manner. In late 1993, Kirsch bought what she describes as "an exquisite, rare Eskimo parka made from translucent walrus intestine, costing nearly $10,000." Smith humiliated her, Kirsch alleges, saying the parka "looked like something from the L.L. Bean catalogue."

Last September, Smith fired Kirsch and Drake. Kirsch filed a complaint with the New York State Division of Human Rights, charging Continental and Smith with sex discrimination. The company then sued the couple, saying they can't account for some $100,000 of artwork.

Meanwhile, Continental had been sold to Chicago's CNA for $20 a share, or $1.1 billion, last May. CNA's no-nonsense managers go to museums if they want to see art; the collection went on the auction block.

And what of the walrus intestine Eskimo parka? It sold for $15,000, or 50% more than Kirsch paid for it two years ago. If all of Continental's investments had panned out like the parka, the company might still be independent.

--Andrew E. Serwer