Art and Insurance Series #4:

Insurance is not "One Size Fits All"

Okay so we have covered the importance of insurance and focusing on the individual while identifying the need of insurance for fine arts and the reasons why insurance is so important to the artist. So, now what?

We are all familiar with the saying "one size fits all." The saying sometimes is amusing - I mean how can the same raincoat fit a 5' 2" girl as a 5' 8" woman? Every time I see that, my response is, "get real." I don't waste my time with the "one size fits all" rack. I look for a garment that will fit me because it was made for someone my size and shape. Insurance is the same way. One size does not fit all.

Television commercials and written advertisements for insurance are all over the place - when it comes to homeowners and motor vehicles. How much advertising have you seen for fine arts? I can't even remember seeing even one ad for fine arts insurance. Insuring fine arts is not even close to insurance for automobiles; it in itself is a fine art.

Insurance for fine art is a specialized field. This is an advantage because each artist needs a policy specific to his or her needs. While there are many standard policy forms such as for museums, dealers, galleries, etc. one of these may not be the best for you. A manuscript policy is one that is custom written to meet your individual needs.

Fine arts coverage is not limited to oil on canvas. The policy will be specific and describe fine arts so that there is no confusion. Fine arts can mean paintings, etchings, rare books, manuscripts, rugs, sculptures, and items of artistic or historical value. High end musical instruments can also be considered fine arts. They may also fall into the artistic and historical value part of the definition. Make sure you check the "Definitions" portion of the policy. This is where you will find the definition of fine arts. The Merriam-Webster dictionary definition for "fine art" is "concerned primarily with the creation of beautiful objects."

It is important when obtaining insurance to keep the following in mind and to discuss these points with the agent/broker/producer:

• What is Covered Property?

  This was mentioned in Art and Insurance Series #2 but bears repeating. While there may be a definition listing for "Fine Arts" it is important to review to see if there is a specific area of fine arts listed for covered property. Under the “Covered Property” clause in your policy, there may be some restrictions as to what is covered.

• What is the property that is not covered?

  This area is usually specific. An example would be income that your work brings in - traditionally this is not covered or has very limited coverage on an insurance policy. Your customer purchased a specific piece and you have shipped it directly to them. As soon as your customer accepts the delivery than there would not be any further insurance coverage for that piece. Should the damage have happened in shipment, that would be before possession, your insurance policy could provide you coverage. Insurance for fine arts is strictly for the works. However, as I said earlier, an insurance policy can be written according to your specific needs. It is important to make sure this area is understood just in case anything would apply.

• What types of losses are covered and what are excluded?

  Traditionally an insurance policy is considered "all risk" or "open risk". Simply put, the policy covers all risks unless they are specifically excluded in the policy. Risks which are excluded or not covered could be war, terrorism, flood, government action, and others. Exclusions can be added back into the coverage’s by an endorsement. An endorsement changes the initial policy to include or exclude something. This would also change the premium paid.

• What is the limit of liability?

  This can be a blanket limit (one amount covering everything) or a limit for each specific piece or both. If you have some specific pieces that you would like individual coverage with a dollar limit of liability than you would "schedule" the item.

• It is very important to know your coverage limits or the maximum dollar amount of coverage.

  Maybe in general a blanket dollar amount that covers all your fine arts would meet your needs especially if your inventory is ever changing. Schedule a particular piece for a set dollar amount. Say for example one owns several musical instruments that are of high dollar, then it might be best to have each one listed separately for a specific dollar amount on a schedule. Basically, how much is that particular instrument insured for?

• Is there a deductible that would apply?

  Believe it or not there are some policies covering fine arts that do not have a deductible. A deductible is the amount that you are agreeing to pay yourself on any loss. Say for example a piece was damaged and there is a $1,000.00 deductible and the loss is for $800.00. This would mean that you as the insured would be paying for it all out of pocket since it did not meet the deductible for the insurance coverage. If the damage were $2,500.00 than any settlement would be for the $2,500.00 minus $1,000.00 or $1,500.00. When deciding on a deductible amount keep in mind that the lower the deductible the higher the premium (cost of the insurance).

• What is the coverage territory?

  This can be within the United States or worldwide. Some polices are also specific to locations/addresses and there is no coverage for anywhere else. This is one of those areas where you need to consider. For example, you are a gallery owner and that is the only place where you keep the fine arts. Then you may want to consider scheduling or listing the location and excluding all other locations or have higher coverage for the primary location of the gallery and then minimal coverage for exhibitions, in transit, any other location, etc. If you travel worldwide than you may want to consider worldwide coverage (there could be government restrictions in some countries that would mean they would not be covered).

• Are losses while in transit, on exhibition or trade shows covered?

  These locations can be covered in the policy itself or say for an exhibit, there can be an endorsement that is for a specific date range at a specific location. If you ship a lot of your fine art pieces than transit coverage needs to be seriously considered. If you never do any type of exhibition or trade show, then this area may not need to be insured.

• How is the valuation determined?

  So many people I speak with are not aware of the valuation clause in the policy for claims settlement. Many choose to have this insured for their cost plus a percentage or the selling price minus a percentage. Valuation can also be based on an appraised amount prior to the loss. Speak with your agent/broker/producer to see what the valuation clause states and if it is the right clause for your work. Is there a Pairs and Sets Clause? Take for instance a specific work that is part of several pieces than a pairs and sets clause should be considered. If something happens to just one of the pieces that are part of the one work, then the value as a whole has changed. With a Pairs and Sets Clause than all parts are looked at and there is a consideration for any diminution of value since by the loss of the one the value has greatly changed. (This may not apply to your work.)

• Is there coverage for diminution of value?

  While some fine arts can be conserved, many times the value has greatly diminished with time. Some policies specifically do not cover this and others are not really clear. If a piece is damaged but it can be conserved/restored/repaired and the costs together with the diminished value are far less than the value of the piece, then it may not be considered a total loss.

• Is there a Package and Shipping clause?

  It is very common for this clause to be included in the policy. Many times it is not specific and may just state that all items insured must be packed and shipped by competent people. Keep in mind that how something is shipped can make a big difference on arrival at the other end.

• Is there a Buy Back Agreement (in case of theft, if the piece is recovered)?

  What are the conditions of the policy that the insured is to follow when filing a claim? I handled a claim that involved an oil on canvas painting. The theft occurred 10+ years ago and the painting was found in 2008. This clause was in the policy at the time of the theft. The insured, even though more than 10 years had passed, wanted the painting back. Typically in that situation, the settlement amount paid to the insured would need to be returned to the insurer (insurance company) before the piece would be released.

While there are many more areas that would be in the policy the above should be understood before you walk out the door of the agent/broker/producer's office.

Because of the economy, everyone is careful when making decisions when it comes to money. That is totally understandable. This is why insurance is such an important step. If the pipe bursts in your studio and all your work is damaged, but you have no insurance to cover, then you have just cut your income even more; basically starting over. However, if your work was insured, there would be a minimal loss financially. Insurance is not for profit. The good thing is, depending on what your policy states, you may have the selling price or close to it, paid directly to you from the insurance company.

Since the policies can be client specific, the premium rates will vary. Make up a list of what you want insured and what coverage you want and need. Take this to an agent/producer/broker who deals in fine arts and review with the agent/producer/broker. After all your wants have been reviewed and a quote is given, if that quote amount is outside your budget, not to worry. Next step will be to see what coverage you really need and then have it quoted. It is very important to not leave your insurance representatives office until you totally understand the policy; after all it is about you and for you and does involve your business. It is so important to obtain insurance coverage that is specific to you - one that covers your business protecting you from loss or damage. Why pay more premium than you need? If you don't need that coverage then it is a lot of fluff. Remember that in insurance one size does not fit all.

Art and Insurance Series

Shaunda Clifton, fine art claims adjuster and writer, will be contributing a series of articles on insurance and the artist for Fine Art Registry. Read the first article in the series, and look for future articles on the following subjects:

• Art and Insurance Series #1
  I Filed My Claim, Now Where's My Money?
• Art and Insurance Series #2
  Insurance - What the Heck Does That Have to Do with Me?
• Art and Insurance Series #3
  Five Reasons Why Artists Need Insurance
• Art and Insurance Series #4
  Insurance is Not "One Size Fits All"
• Art and Insurance Series #5
  OK, So Do I Go to My Local Agent?

— by Shaunda Clifton  |  December 31, 2009

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