5 Key Tips to Consider Before Deciding to Buy Art Insurance

by Gayle B. Tate

Flickr Photo Credit: robin.elaine

When Marvin Gaspar came to my office for his appointment to discuss an appraisal, I had little clue where I would end up on the roller coaster ride he was about to take me on.  Marvin was a claims adjuster from an insurance company who was asking about appraising an artwork.

He showed me a few photographs of a Miró (Joan Miró – Spanish, 1893 – 1983) lithograph that his company had been asked to pay a claim on.  Of course to him, it was just a bunch of marks on paper, but the claim was for well over $10,000, so his boss had asked him to get a second opinion.  I could see danger written all over this one.

The subject artwork had been stolen, along with a number of other things from the claimants home, and the insurance company was involved in the process of settlement.  The artwork had been purchased on a cruise ship during the owner’s vacation excursion with his family.  More danger.

After careful research, I submitted my detailed report.  The Miró lithograph was appraised at fair market value for $2,600.  When the owner saw the results, I had nothing less than a hornet’s nest in my face, he was so irate.  I simply asked him if he would like to replace the lithograph, and his answer (to my surprise) was “yes.”

Within two weeks, I presented the owner with a replacement lithograph from the same edition, framed and with an even lower serial number than the one he lost, in exchange for a check for $2,600.

It actually was the easiest thousand dollars I had ever made at the time, not to mention my appraisal fee of $200 from the insurance company. The owner was delighted, as he received a suitable replacement for his artwork.  The insurance company was delighted, as they saved nearly $9,000 in the process, in exchange for a $200 fee, and I was delighted in that I made $1,200 in the process of making two different people, on two different ends of the same  transaction, happy as larks.

Art Value Is Often Very Subjective

What’s the point?  It’s not that the people, whether representing an insurance company or an individual who suffered a loss, were dishonest or trying to pull something over on each other.  It is simply this: everything has a certain value and, if that value to individuals in transactions is fair and equitable, the economy of our nation flows with much greater ease and simplicity.

But the truth is, law suits are filed every day over issues of value.  Usually, it’s not that one person has intentionally defrauded another in a business or relationship issue.  It’s more that the expectations of one or the other has been compromised, and the feeling of loss drives one to express that loss in the legal system.

In fact, art is a completely unique area of commerce, where value is very often quite subjective.

For example, if I go to WalMart to buy a vacuum cleaner, I can simply compare price tags of various brands; it’s all rather cut and dried.  Then, if my vacuum cleaner is burnt up in a fire, I can collect an insurance check for my purchase price and replace it.

On the other hand, if my Picasso drawing is stolen, I might have a receipt showing that I paid $23,000 for it in 1974, but I cannot replace it for that in 2010.  Unlike that WalMart vacuum cleaner, the Picasso drawing cannot be replaced, not even once.

Often, the value of a drawing has both intrinsic as well as deep personal value.  For example, it may have been bought while on someone’s honeymoon in Spain and carries the hand print of their lives with it.  What is that worth?

We can replace that drawing with this drawing, but it will never be the same.  Even if we are replacing an etching (or any other multiple image) with its twin, it will never be exactly the same.

Fortunately, if you are looking to invest in art, there are some reliable constants and guiding principles you can lean on.  Here are but a few:

1. When determining the value of fine artwork, first look within.

I am occasionally approached by individuals who ask me if their planned purchase is worth what they are about to pay.  My simple reply is this:  “If you have the money, and are willing to pay the asking price, then buy it and enjoy it for what it is to you.”  After all, is this not the foundation of commerce?  Does it matter if it’s a vacuum cleaner or a fine painting?  Not if you are honest with yourself about the foundation of your purchase.

A fellow art aficionado once passed along to me this bit of wisdom regarding how to conclusively determine whether or not to buy a painting: Ask yourself, how you would feel if I was standing behind you and bought the painting the minute you walked away.  Would you be grateful that I, in a way, saved you from yourself, or would you lament the loss of a fine work of art you had the opportunity to acquire, but momentarily lacked the conviction to do so?

So there it is.  We have a value guideline:  What is it worth to me?

2. For expensive art, get a professional appraisal before you insure it.

The next step is determining the value of your artwork when it comes to the insurance company; in this case, we need to be less subjective and more objective.  Is there a common value that can be determined by the marketplace?  Of course there is.  If the marketplace is the flea market, where you are buying an artwork for $35, it really doesn’t matter.  But if you are about to purchase a Miró lithograph from a cruise line sales pitch for around $11,500, it might make all the difference in the world.

When to seek the counsel of a professional is a matter of personal choice.  To some, eleven thousand dollars is not a great sum.  To others, it’s a whole lot.  I generally counsel people who come to me for such evaluations, that beginning around the one to two thousand dollar point, one needs to be thinking about a professional appraisal.  Most people cannot really afford a loss of $2,000 and would need help to recover.

The secret to recovering is this: have a thoughtful, relevant and timely appraisal in hand at the time you sign for the insurance, not after a loss.  Why do battle with an insurance company, when it can be avoided at the start?  Insurance companies are like any other, in that they are in business to make a profit, and paying unsubstantiated claims are an invitation to warfare.

3. Certificate-style artwork appraisals are rarely credible.

An appraisal done on a Xerox copy of a diploma-looking “certificate” is usually not worth a great deal.  I’ve seen so many of these that I barely glance at the “appraised value” on such documents any more.  There is usually no foundation, no discussion of value, no comparisons or substantiation for value.  Such documents are of very little value at all, and are the bane to the insurance world and an invitation to disaster.

4. A professional art appraisal protects both the insurance companies and the art owners.

Any good appraisal will be chock full of explanations, comparisons and logical and timely conclusions that give insurance companies the confidence they require before paying a claim or charging a policy premium.  In addition, a good appraisal will have some kind of support for authenticity of the subject artwork.  No appraisal is worth its salt, if the artwork is fake to begin with (but, that’s a whole ‘nother topic).

On the other hand, the owner or insured is the one paying the premiums.  Why pay the premiums on a half-million dollars worth of goods, if they are only worth one hundred thousand?  Premiums ain’t cheap.  And we pay for what we are getting, so get what you need and get the value you are paying for.

5. Believe it or not, art insurance companies are on your side.

Always remember that insurance companies are organizations made up of a lot of people; people just like you and me.  Most competent workers are not out to stick it to anyone.  They were hired to serve the customers of the company, not the other way around.  Good service is what makes a company grow, and if you help your insurance company with viable information at the time of initiating a policy, everyone involved will benefit from it.

About the Author

Gayle B. Tate is the founding owner and director of G. B. Tate & Sons Fine Art since 1967. He specializes in American and European paintings, sculpture, drawings and fine prints. His services include authentication and appraisal of fine art, and in addition, has worked with federal authorities and insurance companies to solve and prevent art fraud issues and theft in the marketplace. He was also past president of the Southeast Professional Art Dealers Association, Tampa, Florida.

After 35 years of operating a physical art gallery on the east coast, Mr. Tate retired to his private offices in 1997, and currently works through his office in Laramie, Wyoming. You are invited to visit his web site at http://www.gbtate.com.

9 comments to 5 Key Tips to Consider Before Deciding to Buy Art Insurance

  • Although I probably will not be in the market for artwork too soon, insurance is something that should be reviewed often (annually). You only find out that you were under insured when you need to make a claim.

  • We have some nice Kraznyanski’s and Billets and one original Derek Smith, but they are valued at under $5000 total, so we blow off the idea of art insurance. If our house burns down, we’ll use a little of the insurance to buy more pretty stuff, but we won’t shoot ourselves in the head if we can’t get the exact same works again.

    • Our point exactly… if you have purchased what you like and are pleased with the use of your funds, you have won already. If the loss is potentially not so great, insurance shouldn’t be an issue.

      What if your Derek Smith suddenly becomes worth in five figures (yes, it does happen), what then. Something that makes you go “hmmm”.

  • Yikes! That guy must have been bugged to know he paid too much for his artwork but that’s nice that his insurance took care of it swiftly. I don’t have any art to insure at the moment, but if I’m ever on a cruise and hankering to buy me some art it may lead me to get it insured.

    • Yikes! indeed!… the typical cruise ship sale, either by exhibition or auction, are grossly overvalued. We have been involved on a number of occasions in helping buyers get money back.

      The vendors charge five to ten times what the art is worth, collect the money and, if a buyer discovers his wallet on fire or his charge card wilted from the transaction, he can recover his purchase price with a substantiated claim. A supported appraisal is usually sufficient to get the job done, as they don’t want to risk the press of a law suit.

      For them it’s simple economics… give the buyer his money back… the cost is easily made up from the dozens of others who’s money they still have. If you’re making millions, you can afford to refund thousands.

      Sometimes all it takes is a simple phone call, or a few minutes on the internet. I know of very few art professionals (including myself) who are not willing to share knowledge and information. Most are glad to do it… it’s good for everyone and a win-win for all.

  • I own a fine art gallery, and purchased an insurance policy that was supposed to be specific to selling consignment art. The following year, my gallery was broken into and vandalized, and the insurance company is putting me off over and over, saying they need to send this and that person to appraise the art.
    To my mind, the art is worth the price that the artist put on it, since that is the amount I am required to give them for it (less my 30% commission).
    What is the point of having insurance on consignment pieces if the amount covered is not going to be the amount consigned?

    • Good point… and sadly, one often discouraging aspect of the insurance “game”. It sounds like simple delaying tactics to me. If you are asking for compensation on a reasonable level, there is no reason for anyone to argue.

      As I said in the blog: “Always remember that insurance companies are organizations made up of a lot of people; people just like you and me”. If your insurance company is within reach, you should go over there and sit with as high an official as possible… the president of the company would be a good place to start. Look him/her in the eye and ask for a reasonable settlement.

      They will not want to go through lawyers and negotiations if your request is well thought out and documented. Take records of both inventory and sales, so show that your request is in keeping with business. As long as the price you are asking for is logical and in keeping with the type of goods you handle, there is no reason for them not to come to terms with you.

      But BE ORGANIZED and REASONABLE. All anyone wants is fair business… both you AND the insurance company.

  • If someone (like myself) owns original paintings but only have appraisals from the gallery directly, are you saying that you need to bring in an independent appraiser prior to getting insurance?

    How do I proceed to get insurance for my art work?

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