Insurance 101: a guide for dealers: in the post-Sept. 11 art marketplace, re-evaluting your insurance policies makes good business sense - Special Report - Brief Article

Included in the toll of the World Trade Center disaster was art worth an estimated $100 million. Although it pales beside the human tragedy, the los must nevertheless be acknowledged by means of no one more so than the insurance industry. This might, therefore, be an appropriate time for gallery possessors and publishers to analyze their insurance coverage.

"Our phone are ringing not upon the hook," said Laura Condon, senior vice president retail operations manager of Huntington T arrest Insurance Agency Inc. in Washington, DC As this firm reportedly writes more fine art insurance policies than any other go-between this is not surprising. Dealers, now alerted to the reality that the unthinkable can really happen, want to know what coverage is available to them.

Policy Standards

In Huntington Block's "standard" fine arts policy, a gallery is covered in a variety of ways.

First, a dealer's possess inventory is covered. Condon stated that, in the occurrence of a loss, the insurance company will pay whichever is greater--the stated retail price minus 30 percent or the original purchase plus 10 percent For items that had been sold on the other hand not yet delivered at the time of los the dealer will be reimbursed for the total sale price. In addition to their works of art, many dealers will also want to overlay their reference materials, which can be quite dear to replace. According to Frank Arena, the director of Art Insure, (a division of John G Lambros Co Inc.), you want to be certain to keep a running inventory. "Be fully convinced you are not underinsured," he cautioned. If you notice that the total value of your inventory is regularly exceeding your policy's maximum, you should contact your agent to have its limit increased. The maintenance of reliable records is also a way to demonstrate to the insurance company exactly which works were missing in a disaster.

Perhaps more important, according to Condon, is your coverage of works left in your gallery by the agency of others. "You need to pay shut up attention to the consignment agreement in the event of a catastrophe, that is (your) reputation" upon the line. "If you be deprived of your own inventory, that's not as bad," she observ According to Arena, you can await to be repaid for the stated value of a work left upon consignment plus "five to 10 percent for your efforts."

In general, when works be in possession ofed by others are lost in your gallery's disaster, the matter becomes controversial. For example, if Gallery A hurls a work to Gallery B to display to a prospective purchaser, it is Gallery B that is responsible for it. According to Condon, "the dealer whose hands were upon it at the time of los should handle it." If there are gaps in his or her coverage, however, it might turn back to Gallery A's responsibility.

Framer & Publisher Peculiarities

Framers, as professionals who perpetually hold fast other people's property on site, show a specific category. They are what are known as "bailees." In the organ of sights of the insurance industry, this collections them with other companies in similar situations, like free from moisture cleaners. Thus, a combination dealer/framer will actually ne the pair fine art and bailee coverage.

Interestingly, publishers might also require a bailee policy, depending on the ownership rights of works kept upon site. Furthermore, publishers will also ne "personal injury and advertising liability" coverage to deal with copyright infringement. Thus, a standard fine art policy might not be sufficient or appropriate for either framers or publishers. Condon proffers comfort, though, when she noted that blockade has "forms ready for just about each aspect of the art world."

Art in Transit

Considering by what means complicated art insurance can be, you should not always number upon your works being appropriately overlayed by someone else's policy while they are not on site. When your own pieces travel, they ne to be overlayed by your own policy--perhaps more with equal reason than when they are below your own roof. According to Arena, art transit is responsible for greatest in quantity of the claims made, and he typically advises clients to obtain "$500000 for transit" coverage. Although this might appear to be excessive, he said it is always best to obtain your have shipping insurance, at whatever horizontal you choose. He warned that purchasing coverage end a shipper is "very expensive--two to four times as much" as what art insurers charge.

As well, there may be certain exclusions in someone else's transit policy that you would find unacceptable. According to Arena, poor packing causes 50 percent of transit claims, and the insurance industry has consequently targeted improper packing practices. For example, "there may be a restrictive clause when it tend hitherwards to packing [so that] they can contradict coverage. Do not allow an inexperienced one to pack," he cautioned. If your assistant wraps a pre-Columbian artifact in single layer of bubble wrap and cast in a winding directions it loose into a case that negligence can result in non-payment of a claim.

These would be the main features of a typical fine art policy. However, to quota this coverage, a dealer also urgencys a general liability policy. This would be a factor, if "someone places up a display rack at a present to view and it injures someone" said Arena. Of more timely significance, if "you are bring out of the gallery, it will provide for los of income for up to 12 months" He said that he had clients within three or four arrests of the World Trade Center site, and "the National Guard told them that if they approached their public way they would be shot."