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Protecting your fine artwork with insurance

Rumor has it that casino mogul Steve Wynn once made a $50 million insurance claim on a painting that was damaged when he bumped it with his elbow and tore the canvas.

Most homeowners don't own such pricey paintings but many do prize at least one valuable piece of artwork. For those who do, understanding how to protect their fine art can be a challenge. Purchasing adequate insurance coverage is a good place to start.

Anything that damages a home can also damage the art inside. According to Jay M. Levin, an attorney at Reed Smith in Philadelphia, when Hurricane Sandy devastated lower Manhattan in 2012, it also led to the destruction of millions of dollars of artwork owned by individuals and businesses. Luckily, many of those pieces were covered by adequate insurance policies.

Insurance claims for artwork"The most important thing homeowners can do is to tell their broker what they have, to make sure that it's listed on a policy and to get a proper appraisal so that it's insured for the right amount," says Levin. "Then if disaster strikes, such as Superstorm Sandy or Hurricane Katrina, all is not lost."

What constitutes 'art’?

Insurable fine art can include two-dimensional works such as paintings, drawings, textiles and other framed pieces, and three-dimensional pieces such as sculptures, valuable porcelains, fine antique and contemporary furniture, according to Gordon A. Lewis, Jr., senior director and vice president at The Fine Arts Conservancy in West Palm Beach, Fla. These objects usually have some coverage under general household contents policies, but for high-end pieces, homeowners should purchase separate policies called "scheduled policies."

"Your overall homeowner contents policy covers the art as part of the contents. Then there are specific scheduled policies for works of art and these are generally appended to the underlying homeowner policy," says Lewis.

Ron Reitz, president of Quality Claims Management Corp. in San Diego, says that scheduling artwork also helps to confirm the value of the pieces by putting those values in writing in advance of any disasters.

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"The insured supplies a detailed list of the art and the value he or she wants it insured for. If there is a loss to the art, then the homeowner receives the amount they are insured for -- or the amount it is 'scheduled' for. These policies are actually less expensive than homeowner contents policies and importantly, they do address the question of value if a loss does occur," says Reitz.

Insurance claims and restoration

As a public insurance adjuster, Matthew Blumkin, a partner and executive general adjuster at the Greenspan Co./Adjusters International in Encino, Calif., has seen numerous home insurance claims on the West Coast relating to fine arts.

"A lot of times, fire damage is the cause for art claims whether it's a statue or a sculpture or a painting, but water damage such as flooding can also cause humidity and other contaminants to impact the artwork," says Blumkin.

After a disaster, insurance companies will work with you to determine if the artwork can be repaired. If so, Levin notes that finding a qualified conservation professional is crucial.

"The care with which restoration effort has to be made is really important. You should not just go to the yellow pages and look for an art restorer. You need someone who is really, really skilled and experienced and also respected, so that when it's done -- a painting, for example—it will still be worth as much as possible," says Levin.

The American Institute for Conservation of Art offers an online directory of conservators that can be helpful in finding a qualified art conservation professional. Local art museums may also be willing to provide referrals.

If your insurance company (after conferring with a conservator) determines that the piece cannot be repaired, then you’ll be compensated according to the value established in your policy.

This is what makes a current appraisal of the piece so important. Lewis and Levin recommend that you have your artwork professionally appraised every three years in order to ensure that you’re purchasing an adequate insurance policy. It is also important to know that a standard home insurance policy will pay for restoration but not for loss in value; a scheduled policy will pay for both.

Lewis says that the art market is moving very quickly, so the art you bought a few years ago could be worth much more today. "In order to keep insurance up to date and be certain that they receive a fair and just compensation, consumers really need to have their appraisals updated frequently," says Lewis. "A little advanced planning can help you prevent a big financial loss down the road."

 

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