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Adjusting Fine Art

Insurance Claims
Case Studies in Loss and Damage
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Superstorm Sandy October 29, 2012
12 UPPER EAST SIDE

9 CHELSEA

21 BROOKLYN NAVY YARD

19 RED HOOK
COURTESY OF THE ART NEWSPAPER
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Fine Art Insurance Policy
 Cover “all risks” of physical loss or damage from any
external cause except as excluded

 Standard exclusions include but are not limited to:

 Wear and Tear
 Vermin
 Inherent Vice
 Damage Sustained from any Repairing, Restoration or Framing
 Hostile or Warlike Action in time of peace or war
 Nuclear Reaction or Nuclear Radiation
 Mysterious Disappearance
 Misappropriation
 Temperature and Humidity
 Loss or Shortage disclosed while taking Inventory
 Shipments shipped under “on deck” bills of lading
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Important Note: These policies

DO NOT exclude flood
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Chelsea Art Gallery
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Basement Storage
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Everything is a jumble
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We know that we have coverage
but now what do we do now?
 Some galleries have in excess of 300 works damaged

 A lot of galleries are underinsured

How can we maximize coverage?

Who do we compensate?

 How do we protect Underwriters interests?

Clients overwhelmed

Everything is a ‘total loss’

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Step 1: Triage

Segregating and drying the artwork

Reaching out for conservators for

assistance when possible

Problems: limited space, no climate

control, no power, not enough
resources
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Sue and Labor Clause

 In case of loss or damage, it shall be lawful and necessary for

the Insured, his or their factors, servants and assigns, to sue,
labor and travel for, in and about the defense, safeguard and
recovery of property insured hereunder or any part thereof
without prejudice to this insurance; nor shall the acts of the
Insured or this Company in recovering, saving and
preserving the property insured in case of loss or damage,
be considered a waiver or an acceptance of abandonment to
the charge whereof this Company will contribute according
to the rate and quantity of the sum herein insure.

 Note: Coverage is in addition to applicable policy limit

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Sue and Labor Expenses

 Purchasing of supplies

 Emergency conservation treatment

 Hiring of temporary employees to assist in recovery effort

 Rental of temporary space?

 Not all policies had sue and labor coverage

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Step 2: Recovery
Works individually examined and
segregated:
1. Total losses
2. Need restoration
3 Works to be remade
4.Undetermined
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Step 3: Adjustment
Occurring in stages
Is it really a total loss?
Application of policy valuation clause
Restoration plus loss in value
Re-fabrication Costs
How to maximize coverage for
underinsured ?
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Total Loss
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Valuation Clauses

 DEALER
 PROPERTY OWNED BY THE INSURED AS STOCK FOR SALE: COST
PLUS 30% RETAIL MINUS 20% WHICHEVER IS HIGHER.
 PROPERTY ON OF OTHERS ON CONSIGNMENT:
 CONSIGNED VALUE
 CONSIGNED VALUE PLUS 10%
 SOLD BUT NOT DELIVERED: SELLING PRICE.

 PRIVATE COLLECTOR
 AS PER SCHEDULED VALUE OR AGEED VALUE
 FAIR MAKET VALUE AT THE TIME OF LOSS
 CURRENT MARKET VALUE AT THE TIME OF LOSS
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Valuation Clauses Continued

 MUSEUM POLICY
 FOR OWNED PROPERTY: HIGHER PRICE PAID INCLUDING
EXPENSES OR CURRENT MARKET VALUE AT THE TIME OF LOSS.
 PROPERTY OF OTHERS ON LOAN TO THE INSURED: AS PER
AMOUNT AGREED UPON BETWEEN LENDER AND INSURED.
 PROPERTY ACQUIRED AS GIFTS: AT CURRENT MARKET VALUE
AT THE TIME OF LOSS.
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Explain this to the Underwriter
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Restoration Plus Loss in Value?

Front of Painting Back of Painting

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Policy Clauses to Note

 Partial Loss: In cases of partial loss, or damage to any insured

item, the amount payable shall be the cost and expense of repair
and/or restoration plus any resulting depreciation in value, but
not exceeding the full insured value of that item.

 Pairs and Sets: In the event of Loss or Damage to any article or

articles which are part of a set, the measure of Loss or Damage
to such article or articles shall be a reasonable and fair
proportion of the total value of the set, giving consideration to
the importance of said article or articles but in not event shall
such Loss or Damage be construed to mean total loss of the set.

Note some policies are now giving the insured a choice: “we will
pay you the insured value of the entire property and you agree to
surrender the damaged and sound portions to us”
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Pairs and Sets
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Can we make another one?
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Salvage: Would you buy this?
+ Salvage
Ethical and Moral Considerations

 FEMA has classified flood water from Sandy as ‘blackwater’

 Mold

 Possible Long Term Liability Issues

 Visual Artists Rights Act (VARA) or droit morale

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Consequences of Sandy

 Tougher Underwriting Standards?

 No basement storage?

 Premium increase?

 Difference between London and Domestic Markets

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Policy Exclusions
Inherent Vice

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Policy Exclusions
Temperature and Humidity
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José Campeche: oil on panel
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Errors In Process
+ Nicole Sheley
NS International, LLC
PO Box 20579
New York, NY 10021-0071
+1 (212) 734 – 7210
nicole@ns-international.net
www.ns-international.net