FINE ARTS, ADDITIONAL CONSIDERATIONS

(March 2018)

Fine Arts insurance provides valuable protection against sources of tangible loss or damage, except for the sources of loss that are specifically excluded. Coverage is provided using either a scheduled personal property endorsement or a fine arts form.

ISO PM 00 17–Fine Arts Form

AAIS PM 00 01-Personal Articles Coverage Form Analysis

ISO PM 00 09–Personal Articles Standard Loss Settlement Form Analysis

Items that are eligible for coverage include the following:


antique furniture	etchings	art glass windows
pictures	tapestries	marbles
ornamental rugs	statuary	rare books
paintings	bronzes	antique silver
manuscripts	porcelains	rare glass

There is also room for coverage for miscellaneous items that are rare, have historical value, or artistic merit.

However, protection does not apply to the above or similar types of fine arts when such property belongs to or is in the custody of any of the following:

· Dealers

· Auction rooms

· Museums

· Art galleries

· Art institutions

Protection for such exposures should be sought under a commercial coverage form.

Related Article: AAIS Fine Arts Coverage Forms

Valuation

As is the case with any class of special property, any documentation that helps to establish insurable value is important. Current appraisals should be obtained for valuable fine arts. The market for such property fluctuates. Underinsurance can be avoided by securing periodic appraisals (perhaps every two years at the latest). Even with items of lesser value, the existence of bills of sale and appraisals will facilitate adjustments in the event of loss and reduce questions of valuation. When values are not substantiated to the company’s satisfaction, the scheduled coverage might be declined (in the case of an application) or terminated (in the case of an existing policy).

Registration of Art Objects

Information for identifying and registering works of art of exceptional value are available from various sources including the International Art Registry (U.K.) Ltd. and the International Art Loss Register, a databank that is sponsored by a consortium of art dealers, insurers, law enforcement agencies, museums, and related parties.

Related Article: Art Identification and Registration

Art as Investment

Valuable paintings and other objects of art are often acquired and kept for pure aesthetic reasons. However, art collection is also a popular method of investment for individuals and homeowners. Many investors actively follow the art market to supplement their activities in the stock market. Such persons may acquire art purely in the hope that its value significantly increases. It is important that agents and insurers ask about the existence of fine art and other collectibles during Homeowner policy renewals or personal insurance program reviews.

Need for Specialty Insurance

If the value of an insured’s property is modest, a property owner may be comfortable with the perils insured against coverage provided under an endorsed homeowners policy. However, it is important to address coverage issues with insureds who may think that their property is only threatened by common perils such as fire, vandalism, or theft. This mindset needs to be changed because it is not broad enough to mirror reality.

Example: While midway through a vigorous spring-cleaning, Mrs. Jones gently places an old painting, a family heirloom, on the carpeted floor so she can dust the wall. She asks her teenaged daughter to vacuum the living room. Missy, in a rush to get back to an EHype session, hurries the job, ramming the vacuum cleaner into the heirloom. The entire center of the picture is ripped out of its frame and sucked into oblivion. Unfortunately, there's no coverage under the homeowner's policy for the accidental vacuuming.

Proper protection is important for art objects of significant value. Comprehensive, proprietary coverage might be appropriate to secure protection against direct physical loss on the widest available coverage basis for owners of paintings, etchings, pictures, tapestries, art glass windows, and other bona fide works of art (such as valuable rugs, statuary, marbles, bronzes, antique furniture, rare books, antique silver, manuscripts, porcelains, rare glass, and bric- a-brac) of rarity, historical value, or artistic merit. Items are scheduled using detailed descriptions. Their accompanying limits of insurance are, ideally, based upon bills of sale or recent, expert appraisals. Rates are typically based upon a per hundred or per thousand dollars of coverage basis.

Inventory Recommended

One way to help an insured evaluate his fine art exposure is to recommend that a full inventory be created, either just for the special property or for all of his personal property. Such a suggestion would be particularly opportune shortly after an insured has just made an art purchase (or acquired art as a gift or inheritance). The process of an inventory may easily prompt an insured to more thoroughly determine his need for coverage. The inventory may quickly point out that an insured owns more special property than he or she realized. Or, the act of listing values for such property may cause an insured to realize that he has no idea of their current value. Even if the insured has sales receipts or appraisals, questions may arise over their relevance, especially if they are not recent (less than two years old) or, in the case of appraisals, do not come from a qualified source. It is important that an inventory contains enough detail to properly identify (distinguish) each piece mentioned.