Living With Art

The Art of Art Insurance: A Practical Guide for Artists, Galleries, and Collectors

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The Art of Art Insurance: A Practical Guide for Artists, Galleries, and Collectors
Collector Peggy Cooper Cafritz's Northwest DC home

When Hurricane Sandy hit the east coast in October 2012, one of the most damaged neighborhoods in New York City was Chelsea, the arts district along the Hudson River. Flooding on some streets reached five feet, and numerous ground floor galleries suffered severe damage both to the structure of the buildings themselves, and the artworks within. Now, almost five years later, many are still recovering, thanks to skyrocketing insurance premiums and reduced coverage. Still other galleries have left Chelsea altogether in search of more affordable spaces to offset the increasing costs of rent and insurance. All this is to say nothing of the lost works of art.

Chelsea is no longer the sole arts district in New York, and many of the newer hubs are also at risk—Gowanus, most of north Brooklyn, and parts of the Lower East Side are all located in flood zones. But even higher ground won’t save collections. In 2009, renowned collector Peggy Cooper Cafritz, a founder of the Duke Ellington School of Arts, lost her priceless collection of African and African American art to a house fire in Northwest D.C. We don’t say “priceless” to contribute to the mythologizing of art, either—Cafritz’s collection literally hadn’t been appraised in years, meaning insurance companies weren’t able to fully return her losses, leaving one of the most fastidious collectors of under-represented art to start from scratch.

Certainly, the most tragic losses in the event of a disaster are those of human life. Second to that, for many people in the arts, are cultural artifacts. Financial losses can affect institutions’ abilities to provide fundamental support for society and the arts, and therefore it’s important to insure our cultural legacy. Meanwhile, insurance companies can feel very far removed from the arts—with their talk of “assets” and threats of lawsuits—and scare collectors, gallerists, and, yes, even artists, from maintaining proper insurance coverage. Last week, the Art Business Conference held in New York offered some practical advice on all things, well, art and business—including some good advice on how to insure your collection whether you’re a dealer, collector, or artist. Here’s what we learned.

 

 

Tip #1: Don't Cut Corners

When Sandy hit, Printed Matter, a non-profit art book store founded by Sol LeWitt and Lucy Lippard, lost hundreds of thousands of dollars in original works that were damaged by flooding in their basement storage. However, because the organization was insured as a bookstore rather than a gallery and they were only covered by a general policy without an art rider (an add-on provision to a basic insurance policy for additional cost), Printed Matter was unable to even file a claim, according to reporting by the Observer.

Most insurers should be able to provide you with comprehensive coverage, as long as you’re clear with them about what exactly needs to be insured. This is not an area to cut corners. Be honest with your insurer about the risks of your organization—ie., whether you’re located on a ground floor or in a flood zone, whether you ever hold valuable work, and whether you have a comprehensive disaster plan that addresses the safety of high-value items quickly and efficiently. Neglecting to mention risks could lead to loss of coverage in the future.

 

 

Tip #2: Artist Studios Need Insurance Too

Many artists neglect to insure their practice because they mistakenly believe they’re already covered by a homeowner or rental policy—which are, in fact, strictly limited in coverage to assets that aren’t considered part of a business. (Sorry, but at least in this case, your art, if it’s for sale, is considered a business.) Sometimes, insurance riders—essentially à la carte add-ons to a general policy—can be purchased to cover works of art or business practices, but there are also a number of insurance companies who specialize in the more complicated policies that art insurance typically requires. These agencies are experts at navigating provenance and the complicated methods for valuating works of art. Take a day to research brokers in your area, and ask them pointed questions about their familiarity with insuring studios and art collections.

Other artists hesitate with insurance because they’re unsure at what point a work of art is technically finished—at what point it stops being a conglomerate of a couple hundred dollars’ worth of material, and starts becoming a valuable "piece." Fortunately, in this case, the insurance industry is largely unconcerned with such philosophical questions. Generally speaking, insurance adjustors will use an artist’s past sales to determine valuation. If you sold a similar painting for $1,000 (and can provide legitimate documentation), expect a valuation of about $1,000, unless you’ve started working with precious metals. Otherwise, if you don’t have enough past sales to convince an insurance provider to insure works individually, your best bet is to look into having your artistic practice insured as a business, which can provide a number of protections regarding finished works, materials, equipment, studio properties, etc. There are a number of possible avenues to take regarding business insurance, but most insurance brokers will have greater familiarity here than with art insurance in particular.

 


Tip #3: Mediate Risk with Design and a Disaster Plan

Many New York galleries no longer hold their major shows during hurricane season, despite the large foot traffic of late summer and early autumn in the city—a valuable lesson learned after Sandy. This is just one way we’ve gotten smarter about managing risk. For example, spreading valuable works across separate facilities minimizes the risk of an isolated catastrophe wiping out a large number of works, as with what happened with Cafritz’s collection. Or, if you’re curating a show in a multi-story space, you might consider whether the major works will work better on the second floor. This is where realism and idealism come into conflict, and tough choices need to be made.

It’s also a good idea at this point to analyze your space for structural weaknesses. Skylights, for example, provide beautiful, even light that’s perfect for viewing works hung on walls. However, it might be time to ask a glazier to examine the integrity of that old warehouse glass, in case it’s due to break during the next storm. Studio artists might want to take this moment to double check that unframed chromogenic prints aren’t placed by windows, or paintings aren’t resting near radiators. These small things sound obvious but are easy to overlook, and negligent care could lead to an insurer determining you to be at fault, even if you don’t have a policy yourself.

 
 

Hurricane SandyWorkers remove a photo from Gallery 303 after Hurricane Sandy. Courtesy, Gus Powell, New York Magazine

 

Tip #4: Risk Allocation: Know Who’s Responsible, and When

Risk allocation is one of those areas where people start to tune out, and where insurance companies start to get finicky. Basically, “risk allocation” is an industry term for shared responsibility. If you’re a collector, you might have perfect insurance for any works hanging in your living room. An artist should have a comprehensive policy for their studio. And a gallerist might take out a temporary policy for an exhibition. But who’s responsible for the work while it’s in transit on public roads? Who’s at fault, legally speaking, if the gallerist kicks a hole in a painting while visiting the artist’s studio?

Many galleries and institutions have their own in-house art handlers who are covered while at the gallery or the gallery's storage facility. Make sure they're also insured in transit. If you are an artist or collector working with a gallery that doesn't provide their own art handlers, make sure the art handlers you use are trustworthy. Hiring a trustworthy art handling service means hiring an insured art handling service. If a truck loaded with your latest masterpiece gets in an accident, you’ll want to know that they have their own comprehensive policy. Otherwise, it might be your policy that covers it, which means higher rates and diminished coverage in the future. Or worse yet, your insurance provider might reject your claim because your policy doesn’t cover a specific form of damage. Be clear in your negotiation with contractors regarding who is responsible for the safe-keeping of an artwork at every stage, and cross-check everybody’s insurance plans to confirm coverage.

These concerns certainly aren’t limited to major artists, galleries, and collectors. For instance, I currently have a large pigment print in my basement storage unit after I curated it in a cafe exhibition. My mandatory rental insurance policy is inexplicit regarding coverage of assets technically outside my apartment—or assets that I don’t actually own, for that matter—and I can’t guarantee that the nearby washing machine won’t overflow. So, you tell me, is this work currently insured where it sits? If so, under whose policy: mine, the artist’s, or my landlord’s? (Clement, if you’re reading this, come pick up your work!)

The flip side of this conundrum is that an insured work might be covered under multiple plans at any given point. For example, a collector might hold a policy for a particularly valuable sculpture, and a museum might have a policy for a show that sculpture will be exhibited in. In the event of damage to the sculpture, maybe the museum has more favorable coverage, or maybe vice versa. The collector and the museum will want to come together to decide which policy to file a claim under; better yet, negotiate those terms as part of the loan agreement.

 

Tip #5: Cooperate With Your Insurance Company


Insurance companies are for-profit institutions, which means they’re not happy when they have to pay out. A good provider will work with you to cover your practice, but in the end they’ll be looking for a way to recoup their own losses, which usually means they’ll be looking for someone to sue for damages. They call this “subrogation,” and the law is really in the insurance companies’ favor here.

If a third-party contractor causes damages, and your insurance provider determines you’re not at fault, you might think that’s the end of the drama for you. Not so fast. In reality, your insurer might be planning a lawsuit against that contractor. (Similar to getting rear-ended in a car: You might not be paying for your replacement fender, but the person who hit you will surely get a bill.)

Be prepared to provide your insurer with all sorts of documentation they might request—provenance, conversation records with your contractor, records of policy adjustments, and anything else regarding the safe-keeping of your art. More frustratingly, you might be subpoenaed for a deposition, or to testify at trial. In these cases, you can trust your insurance provider; it’s unlikely they’ll be arguing against you, because that would mean they’re the ones who will ultimately have to pay out for damages. The exception here is if they want to prove negligence on your part (eg., you withheld records, overlooked a security flaw, or something similarly crucial). So, it’s important to cooperate with your insurer, because otherwise you might be giving back that check. Another benefit to hiring an insured contractor is that your two providers will do much of this legal negotiation in the backend.

 

 

Tip #6: Appraise Your “Assets” Regularly

Look, this is the art market. We’re all aware of how rapidly the value of an artwork can fluctuate. When was the last time your collection was appraised? Recent exhibitions and sales, even on the secondary and tertiary markets, can affect the value of a work of art, and some insurance companies recommend annual valuations. If you’re not a major collector, you can get by with less frequent appraisals, but remember that an outdated insurance policy might mean your collection is not completely covered.

Note that the value of an artwork on the market might be different from the value of a damaged work as determined by a claims adjuster. In addition to the market value, there are a number of factors insurance companies will take into account when appraising works. For one, they’ll want to know how easily a damaged work can be repaired. Is the artist still living? And if so, are they willing to fix damages (slash, can they legally be required to)? Or will the work have to be sent to a conservator’s studio? Are conservator studios overflowing with work following a natural disaster? Were your record books also damaged? Is the value or ownership of the work in dispute? These are all questions to consider during appraisals.

 

 

Tip #7: Help Each Other Out

When Sandy’s floods came, many ground-floor galleries thought their works would be safe resting on tables above the ground. They were proven wrong when water levels reached chest-height. However, the silver lining of natural disasters is that neighbors come together to help each other out. If you find yourself scrambling to protect a painting, maybe your neighbor upstairs is willing to hold the picture until the storm passes. Remember that this might technically leave your work uninsured for some time, but in the case of damages, maybe you shouldn’t repay your neighbor’s goodwill with a lawsuit. We’re all in this together for the good of the art, after all.

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