The special insurance needs of art collectors
October 24, 2018 by Greg Meckbach
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A recent prank by an anonymous street artist shows that collectibles – which require special insurance – can become more valuable if they are damaged.
“Normally when a piece of art is damaged, it would drop in value,” Kelly Juhasz, principal of Toronto-based Fine Art Appraisal, said in an interview.
This was not the case, however, with Girl With Balloon. That painting sold for US$1.4 million earlier this month at Sotheby’s, The Associated Press reported earlier. The painting – by an anonymous street artist known as Banksy – was in a frame that turned out to contain a shredding mechanism. So during the auction Oct. 5, part of the painting ran through a shredder, leaving half the canvas hanging from the bottom in strips.
But the buyer went ahead with the purchase anyway, AP reported.
“This is an isolated incident that is a prank by the artist who is known for this kind of activity,” Juhasz said Wednesday of Banksy. “He plays on the art world. He is part of it but yet he makes fun of it and the huge values that go with buying art, he makes fun of commercialism and extreme wealth.”
Girl With Balloon – which has since been renamed Love is in the Bin – is still worth over $1 million.
But a collector who spends that much on art needs more than a typical homeowner’s policy, Juhasz said in an interview.
Brokers placing homeowners insurance should bear in mind that risk management includes protecting art from damage. Art collections can be damaged by burst pipes or by getting accidentally knocked off a wall, Juhasz said. They can also be damaged by light, heat, humidity, insects or fire.
“When you are looking at insuring art work, whether it is one piece or a full collection, your goals are to protect and preserve that work,” she said. “Brokers should be asking their clients if they have any collectible items or valuable items that would stand out and if they understand how those items need to be stored and protected and if they understand what the current value is.”
They would normally need a separate fine art policy which covers their entire collection in all of its locations. The insurer should have on file a complete description, including photos, of all art work, Juhasz said. Whether it is art, coins or other collectibles, the broker does not need to be an expert on the valuables, but should understand the materials that are used and the environment in which it is being displayed.
I believe a better solution for the preservation of high-end fine art, particularly a painting, would be for the seller who it is taken is well versed in their work, to advise the purchaser on the basics of installation – where the painting should be hung, connecting it to the wall, and avoiding an area where a break in a plumbing fixture directly above could occur. The seller could also advise on atmospheric conditions that could effect the art. These are things more directly related to the work of the seller as to the safekeeping and preservation of the article and should be addressed at the time of purchase by the seller with a visit to the purchasers home to more specifically lay out the safeguards.
Insurance brokers are not art professionals, HVAC experts, experienced property appraisers, structural engineers nor mechanical technologists. According to our E&O insurers, we would be trespassing into areas beyond our reach of ability were we to so tread and we would pay the price for it. Far better that the experts do their work in which they have been trained, have experience and where a license has, in those areas applicable, proved accreditation.
Let the insurance brokers do their work which is plenty enough.
Personally, I feel the onus is on the homeowner to disclose their art collecting habits. I mean, if you’re going to spend thousands or millions on art work, you had better do your own due diligence and let the broker/insurer know, get updated appraisals, logs, photos, etc.
As for the broker’s part, a few simple questions will go a long way. “Do you have any valuable art work in the house”? If the insured says no, broker’s job is done.