What Happens if Your Art gets Damaged: the Insurance Implications David Scully

Transit Damage: the most frequent cause of claims Why? More transits: online sales, fairs etc. To more places: more customers in emerging markets More checks: post 9/11 security tightened Greater chance of package being opened during transit Restricted airside access- at mercy of general handlers Speed: “just in time” logistics Collaborative Economy: more inter dealer consignments Consignees may be less familiar with physical characteristics of artwork Demand for unblemished art: greater intolerance of repaired/ shabby art particular problems with contemporary art

How are Transits Insured? Shipping Companies usually operate on low liability terms liability may be subject to international conventions where based on weight So your own insurance is essential Usually, Art policies will give automatic transit cover: Within a prescribed geographical area With a sub- limit Possibly with additional terms and conditions Not everything will be covered: check exclusions Fairs may have to be declared separately Sanctions countries exclusion NOTE: Policy terms vary- check your own policy

Is your art suitable for transit? One Usual Exclusion: “inherent defect, wear and tear, nature of the subject-matter insured, gradual deterioration, insects, vermin, rust, corrosion, rot, mildew, mould, fungus, atmospheric or climatic conditions, or action of light” Inherent Vice: “...the risk of deterioration of the goods shipped as a result of their natural behaviour in the ordinary course of the contemplated voyage without the intervention of any fortuitous external accident or casualty.” Lord Diplock- Soya vs White 1983

How does an Insurer settle a damage claim? Insurer has two choices: assuming depreciation is covered in the policy Either: pays in full and keeps damaged piece Or: pays repair costs plus a percentage of sum insured for depreciation Some considerations: Insured value vs Actual Value Is Insured willing/ allowed to give up ownership? - Does Artist approve restoration? - Is satisfactory restoration possible/ cost effective? Where is the art- can it be safely transported to an appropriate restorer? Is it sellable, post repair?

How is Percentage Depreciation Calculated? Very subjective: Market impact- how tolerant are buyers of repaired damage? Market Supply vs Demand Quality of Restoration Visibility of repair? Condition prior to damage. Was there already pre existing damage/ wear and tear? View of artist or artist’s executor/ foundation Resale Value after repair

The Insurer and Broker Claims assessment is very subjective: Price isn’t everything Check reputation/ expertise of your Insurer/ Broker for fair claims handling Many Art Insurers have a marine insurance background Familiar with transit issues Have global specialist marine claims resources Ask your Insurers/ Broker for advice Client confidentiality means no sharing of specific claims details But can give guidance on general trends- develop a dialogue with them Ensure there a mechanism in the policy for Mediation or Arbitration If you can’t agree on claim settlement Avoid acrimony and having to go to Court and publicly disclosing sensitive information

How Transits affect Your Premium Insurers consider: Your Claims Record Type of art you deal in propensity to damage Depreciation Potential Frequency and location/ destination of Transits How many fairs do you go to? Your own Risk Management Minimum standards/ Condition reporting/ contractual framework If you have something good to say, tell your Insurers, even if they don’t ask

Disclaimer This presentation is for information purposes only. The opinions herein are subjective and general in nature and they may not applicable to your individual situation. You therefore should not rely on any statement made in the verbal or written presentation without first verifying with your professional adviser(s). Insurance coverages very tremendously and will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in a particular set of circumstances. Please refer to your individual policy conditions for specific coverage details.