According to brokers, most insurance claims for artworks involve damage during transit. The international insurance brokerage Burns & Wilcox puts the number at 60%. Reducing that risk is a key concern for insurance professionals in the specie space.
However, damage to paintings can take many forms.
“We’ve had incidents like insects and rodent damage,” said Tan Tan (pictured above), senior account executive with Consolidated Insurance Agencies (CIA).
However, those claims were ruled non-claims, she said, because the damage was long term and not caused by a sudden, unforeseeable event.
Tan, a Melbourne-based broker who focuses on specie insurance, said most of the art insured through her firm is high value and displayed in galleries. The galleries are often secure buildings located in CBDs and the art is carefully displayed.
This is a big reason why the main risk to the paintings, she said, is the transit process. This is when the works are either sold or moved to exhibit in a different gallery.
“Claims can happen when the painting is taken down from display and then packed,” said Tan. “Then you’ve got the transit risks, for example if the art has to go first to a third party like the transit company’s warehouse.”
These transit claims fall under the accidental damage covers in a specie policy.
“Most of the stuff is accidental damage cover, so if it gets stolen, maliciously damaged or falls off the shelves – that’s why it’s not cheap,” said Tan.
Apart from the details of the accident, the claims process for a broker and their specie client involves providing proof of loss, and ownership through purchase invoices or valuations.
“Then it goes to the insurer for determining the end value, whether the painting is a total loss, or whether it can be repaired,” said Tan. “But if it’s repaired, there’s a loss in the market value.”
These assessments are part of the basis of settlement for the painting that is explained in the policy wording.
When the art is damaged, Tan said art restoration specialists are involved to give a professional opinion on repair costs and what loss this could mean for the painting’s value.
“They might say, ‘this is not restorable so don’t bother fixing it,’ or ‘you could fix it but you’ll still see the stains so it’s going to lose value,’” she said.
This claims process can produce interesting discussions, said Tan. The four-way negotiations involve the artist, the gallery where the painting is insured, the insurer and the broker.
“Most of the time insurers pay out on an insured incident but the claims process sometimes can involve a bit of friction, like providing required documents and negotiating settlement figures,” said Tan.
In these negotiations with the insurer, she said, the broker often acts very actively on the client’s behalf.
One area that can produce issues is the insurer’s right, in some cases, to salvage and sell damaged art once they’ve paid the claim. The insurer often has this right, said Tan, with older works of art.
“After they’ve paid out, they retain the right to take what’s left of the painting and see if they can auction it or fix it and salvage what’s left,” said Tan. “Sometimes the artist is not happy about that because it can devalue the rest of their artwork.”
She said, in those cases, brokers often try and convince the insurer not to salvage and sell the repaired painting – usually backed by the valuer’s view that it won’t be worth much.
Then there’s more negotiation and the claim payout might be reduced, she said, to accommodate a compromise.
“There’s a bit of bargaining back and forth and when there are difficulties we’re here to smooth things out,” she said.
Usually these issues can be negotiated, said Tan, because none of the parties wants to negotiate for too long.
“In some cases, we just agree to offer a token amount to the insurer to keep the salvage,” she said.
Works by some of the most famous painters have seen transit damage.
In 2001, Rembrandt’s Portrait of an Elderly Woman, painted in about 1640, received a three-inch gash en route from Moscow to Houston. According to a report in the New York Times, the container with the painting was likely dropped, which knocked the painting off the reinforcing bolts that secured it in a climate-controlled container. The bolts cut through the canvas.
In 1998, a plane crash in the Atlantic Ocean killed more than 200 passengers and also destroyed Picasso’s 1963 painting that was in the cargo hold.
Are you a broker in the specie space? What’s the most interesting collection or item you’ve ever insured? Please tell us below
