Collecting Issues & Resources | Insurance for Photography Art

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Most people will never face a disaster that will reduce their 40-foot home to two feet of ashes. Nor will they ever face the loss of a major collection of photography like Robert Koch, of Robert Koch Gallery, San Francisco. But, then again, nobody could have anticipated the devastation wreaked by the Oakland Fires in 1991, either.

"The average person doesn’t have a clue how to protect themselves," says Koch.

"One of the things I learned was that I am not the expert [on insurance.]"

Koch was in Moscow at the time of the fires. Unable to rescue anything, he suffered a total loss: house, cars and photography collection. Having just built a new gallery, he had been storing many photographs in his home, as well as housing an extensive personal collection. His bank-rated, fireproof vaults were rated to withstand temperatures of 1,700 degrees F for one hour. The conflagration welded his vaults shut and incinerated everything inside them. The fire literally burned the sheet metal off cars. Even the foundations of houses in the neighborhood were ruined by the intensity of the flames.

"Temperatures exceeding 1,700 degrees would not have happened in a typical house fire," he explains. "The area looked like Dresden after the war–barren hillsides. All that was left were paved streets and chimneys."

After the fact, he discovered that the only real protection would have been "a foot or two of concrete. Steel is worthless. Concrete doesn’t transmit heat."

Fortunately Koch says he habitually photographed "everything that came into my hands" and had slides of most of his collection. However, his documentation could have been better, says the gallery owner. Koch says he now would make sure that he documented his property with a video camera. Keeping better inventory records is also more of a priority for him.

After a loss occurs, Koch says being proactive and "a squeaky wheel" serve a collector best. Especially in the art photography field, he feels, "Insurers don’t know anything and they say ‘no’ to everything. You have to challenge them on everything."

Ironically, when he supplied the homeowners’ insurer with a list of adjusters qualified to evaluate a photographic collection, "they disqualified the list of adjusters because they were ‘tainted’" by his recommendation.

He cautions that captive agents only know their own companies’ products; whereas "the ones handling multiple companies have to really compare policies" and know more about them.

Regardless of whether they own one image or hundreds, photography collectors ought to be proactive in providing protection for their collections. This includes risk management to prevent damage as well as insurance for unforeseen disasters and theft.

Collectors, dealers and galleries, and museums find themselves with both common concerns and different responsibilities when choosing the best insurance for their particular needs. Here are some considerations for each of them.

Risk Management

Steve Pincus of DeWitt Stern Group in New York City, says risk management and insurance techniques should always be the same. "Whether a museum, dealer or private collector, I don’t necessarily differentiate between them that the product is adequately protected."

According to Pincus, proper risk management allows a collector to have a photograph last a lifetime and beyond.

Several major areas of concern face collectors: protecting their collections while in transit, on display or in storage--from theft, vandalism and natural disasters.

Shipping and Storage Precautions

Prevention of damage may make the difference between owning a valuable collectible and a worthless piece of paper. Simple steps can count for a lot.

"It’s the nature of a photograph, it’s a very fragile object. If the emulsion is damaged, it’s much easier to render a photo a total loss than with an oil painting," says Pincus. "Because of that, care has to be taken when objects are in transit. They need to be packaged very carefully."

Taking the glass out of a frame and replacing it with Plexiglas can prevent damage in shipping "but is sometimes considered too expensive from a dealer standpoint," explains Pincus. Taping glass also helps minimize damage during transit.

Many images are not framed. Instead they are stored in metal flat files. These should be stored in a secure area, such as a vault, if possible, or at least a locked storage room. They should be positioned off the floor at ground level locations to minimize any possible damage if an area were to be flooded.

Display and Theft Precautions

"From a curator standpoint, photographs should be framed with acid-free mounts and hung without exposure to direct sunlight to protect against UV [ultra violet], which can cause damage to a photograph," notes Pincus.

Accounting for environmental considerations, such as heat and humidity, and their possible effects on images are also necessary steps.

Galleries and museums should attach framed photographs to the walls with secure hangers. In most museums, the public can walk up very close to a display. In blind spots, areas where visibility is limited and security compromised, a visitor can easily take a photograph off a wall. Securing property mitigates such theft loss.

Private collectors, galleries and museums also should install a decent burglar alarm system that connects to a central alarm company and/or local police to ensure an adequate response to any attempted break-ins. As an additional deterrent, private homes and galleries should not hide that they have an alarm system. Instead, they should prominently display warning stickers to discourage would-be thieves.

By the same token, collectors should not confuse having a burglar alarm system with being totally secure. All a system can do is deter unauthorized entry. It cannot prevent someone from actually gaining entrance.

"Look hard at the physical space to protect a collection," suggests Pincus. Protect photographs from theft by installing bars on the windows and entrances and double locking doors

Obtaining Insurance

Private collectors, dealers and gallery owners, and museums may choose to work with a broker that specializes in fine arts. Brokers act as mediators between their clients and the insurance marketplace to find the best deals for them. Brokerage companies may include such organizations as: Marsh, Acordia, Dewitt Stern, Huntington Black and others.

These brokers turn to insurers in the marketplace such as: Chubb, Fireman’s Fund, Ace USA, The Traveler’s, AXA Financial and various Lloyd’s of London syndicates.

LeConte Moore, managing director of Marsh, New York, and head of their fine art division, states, "Most people say, ‘I’m insured with Marsh,’ but Marsh is not an insurance company. We are insurance brokers."

The average commission paid to a broker is 10 to 15 percent of the insurance premium.

"The broker acts as your middleman so you, as an individual, don’t have to deal with the intricacies of insurance," says Moore. He advises, "The best deal doesn’t necessarily mean the cheapest price. Rather, it’s the broadest coverage and best price."

According to Moore, the broker should work for the individual client, not the insurance company. "Technically, 100% of their loyalty should be to the insured," he says. On the other hand, agents typically sell an insurer’s line of products, so their loyalty is more to the insurer.

Questions to Ask Your Broker or Agent

What’s the price?
What are the terms and conditions of the policy? What does it say?
What does the valuation clause say? In other words, what will the insurer pay me in the event of a claim?
What is excluded? What is not covered by the policy?
What’s the broker’s level of experience with fine arts insurance?
What’s your commission?
Who is the insurer?
What’s the reputation of the company?
Is it a financially solvent insurer? Are they a rated company? If so, what is their rating?
Does the insurer have a history of fine arts insurance? In other words, are they in it for the long term?
How well does the company pay claims?
What’s the broker’s rationale for recommending XYZ Company?

Broker Tiffany Reda says the process of getting coverage may take up to a week. And that is if you already have an appropriate alarm system in place.

Exclusions

The type of insurance available to collectors, dealers and museums is usually All-Risk. An all-risk policy insures the objects against all risks of physical loss or damage. Even Acts of God, such as wind, fire and rain, are covered unless they are specifically excluded. For example, in California, a collector would have to purchase additional earthquake coverage, although availability of such coverage fluctuates. Events such as war or nuclear radiation are usually excluded because such events are so catastrophic in scope.

Moore advises that most policies exclude employee theft because they want a gallery owner to manage this risk. There is a big difference between a young employee or summer intern walking off with an image, and owner or partner theft of property. However, most policies do not make such a distinction. It is best to read the exclusions and know what you’re in for.

Marsh's Moore says, "Nowhere in the standard art insurance policy does it mention photography." Such policies are not specific to photography collections.

Moore asked Kathleen Ewing, head of the Association of International Photography Art Dealers to sit down with him and rewrote the standard boilerplate insurance policy in plain language so the average dealer could understand it. He says, "You should read your policy. You should understand what you are buying."

In addition, he tried to take out the subjectivities of such policies, by rewriting the language to be specific to what may occur in photography, thereby "taking the gray areas out," says Moore.

Creasing or fingerprints will devalue an image, he explains. Yet, "an insurance adjuster [the person who investigates a loss claim] is not an art curator."

Moore points out other concerns: foxing, where mold induced by humidity eats away at a photograph, chipping of edges and soft creases where the image may bend all devalue a photograph.

Applicants for insurance must answer many questions. Underwriters ask questions about the exposure that exists in any individual situation. They will want to know

Where the objects are stored
How they’re stored
The construction of the building
The building’s proximity to hazards, whether rivers, oceans or fault lines

Underwriters may amend the contract to exclude certain hazards that exist, or restrict coverage on them. For example, if a collector lives near a river which floods, where normally no deductible would apply, the underwriter may amend the contract to apply a $1,000 deductible to any flood losses.

Underwriters will also consider other areas of concern:

Concentration of value in a single item
What the collection is comprised of

Concentration of value in a single item might cause underwriting concern because that increases the possibility that the underwriter could suffer a considerable loss. For example, if a collector is looking to insure a $5 million collection, and one image is assessed at a $2 million value, an underwriter is more likely to be worried about a possible loss than if a $5 million policy consists of 600 images with a spread of risk.

Valuations of Collections

Insurance policies for private collections, dealers and gallery owners and museums will differ not only in coverage, but also in their valuation of a photography collection.

Private collections are insured on an agreed-value basis
Dealer and Gallery collections’ insurance is based on selling price for owned inventory of a gallery, on an agreed consignment-value basis for consigned works, or on sales price plus accrued expenses for sold works that were damaged
Museum collections are insured based on whether objects are on loan to the museum or owned by the museum.

Private Collectors

There are different levels of photography collecting, and different levels of insurance to protect each type of collection.

The average person with two photographs worth $10,000 can go to numerous insurance companies and probably obtain insurance for the images under their homeowners' policy. For collections valued $25,000 and under, Moore suggests that collectors "make sure your homeowners is with a high-end insurance company."

"If I know you’re a mid-sized collector based in New York City [with a collection valued at about $75,000], I’m going to give you a local insurance company that’s going to be quick to respond and would give a good price for this size collection," says Moore.

On the other hand, he explains that a collector with $2 million in photographs would find an underwriter such as Lloyd’s of London to be more competitively priced and more open to covering unusual conditions.

Private collections are insured on an agreed-value basis.

Pincus says, "It’s fairly essential that the collector, dealer or museum have a written inventory detailing the work by artist, medium, title, size and date."

He adds, "It’s the responsibility of the insured to prove the loss. You have to call the insurance company and report that loss."

It is key for collectors to communicate with their brokers and insurance agents. Many people, comments Pincus, are completely unaware anything has to happen from an insurance perspective.

When applying for insurance coverage, "the more legitimate you sound, the better," says Moore. "What they’re looking at is what’s your protection and your experience."

Private collections are underwritten on an agreed-value basis. To determine that value, collectors can either:

Submit an appraisal of photographs
Submit recent (within the last year) invoices or valuation, or
Submit a collection listing by a dealer

Most underwriters would find any or all of these sufficient to agree to values for photographs. In the event of a loss, values are already allowed for and agreed to, making the loss adjusting (that is, payment of the claim) simple.

Losses may be paid on a scheduled basis or current market value (CMV). This is something collectors should be aware of, advises Moore. Some policies schedule a set amount for a collection, "but the valuation was current market value in the event of a loss," says Moore. This may prove more or less favorable for a collector depending on whether CMV meets, exceeds or decreases from the initially scheduled value.

"Photography is a real different art form. Collectors, if they have never had an insurance claim, don’t know why a valuation clause is important," says Moore.

A Personal Collection Policy normally does not cover works while on exhibit at a gallery or on loan to a museum. On the other hand, a Museum Policy is specifically designed to cover the normal business activity of a museum, including exhibitions and loans of works to other museums.

If a collector or dealer is lending photographs to a museum, he or she generally does not have to worry about coverage, as the museum should provide it. However, the collector or dealer should ask a museum for a Certificate of Insurance showing appropriate coverage (that the museum has the coverage its staff claims it has) and that the lending collector is named to the borrower’s coverage with respect to the property being loaned, suggests Pincus.

Pincus adds, "Some policies will exclude coverage for international expositions." This exclusion dates back to World’s Fairs, when large crowds and major assemblies of antiques and works of art in one location made underwriters leery of the potential for catastrophic losses.

For a sample of a "typical" collector policy: Click Here.

Dealers and Gallery Owners

Dealers and gallery owners have different insurance concerns than the average private photography collector.

Dealer and Gallery collections’ insurance is based on

Selling price for owned inventory of a gallery
Agreed consignment-value basis for consigned works
Sales price plus accrued expenses for sold works that were damaged

Like collectors, it is essential that a dealer have a written inventory detailing the work by artist, medium, title, size and date. A copy of this inventory and all the supporting invoices should be kept off premises to insure proper documentation in case of a catastrophic loss. A computer tape or jazz drive with the inventory database, including actually scans of the images themselves is ideal. Rotating this tape so that records are up to date is also crucial.

Under a dealer’s policy, value of a photography collection is predicated on what he or she has set as selling prices for an object. However, a dealer or gallery does not need to provide the insurer with an inventory of their individual photographs in their collection. Instead, a total dollar value of insurance is purchased to cover the gallery, says Moore.

"I stress to dealers that when they set values according to selling price, that the marketplace will bear it," says Pincus.

There is some concern by insurers that in some dealers might drastically overstate the selling price of a photograph. These types of values can usually be challenged under the policy. However, Pincus indicates, "I’ve never had that happen in all the claims I have handled. It’s not inherently a problem."

He explains further, "We really deal with dealers on the high end of the spectrum. They’re honorable and don’t generally inflate their values beyond the stratosphere."

While dealers and galleries do not have to supply an inventory of works or an appraisal at the time of coverage, Moore says underwriters will consider:

How long the dealers or gallery owners have been in business
How much security their premises have, and
What the backgrounds of the principals are.

Like Pincus, however, Moore strongly suggests that they should have their own inventory records.

Most risk management experts also suggest storing a copy of the inventory records, including copies of receipts and computer tapes, off site, preferably in a safe location like a bank storage box. This is a good policy for collectors and museums, as well.

Dealers have many transits, so there may be transit limits and off-premises limits for storage at another gallery, house or warehouse. Any Other Premises Coverage provides insurance for these instances.

Dealers, who often lend to each other, must document these consignments in writing, detailing which dealer had insurance responsibility and at what point. The consigning dealer should request a certificate of insurance from the dealer who is lending the work.

Most art policies exclude any international or national exhibitions "unless you tell us," says Moore.

For a sample of a "typical" photography dealer policy: Click Here.

Museums and Institutions

Most museums are not just photography museums. They usually cover photographic images under their master Fine Arts Policy, which might have $25 million, $50 million or some other total coverage available for the museum’s entire collection.

It’s still essential that the museum have a written or computerized inventory detailing the work by artist, medium, title, size and date.

Museums generally face two major issues, providing coverage for:

Objects on loan to the museum
Objects owned by the museum in its permanent collection.

Works on loan to the museum are valued at a consignment value for which the museum is responsible. That value is established either by appraisal or by the knowledge of the staff on that particular object. Again, it is important to have realistic and current values, so that the institution is not underinsured or not overpaying for inflated figures that may be challenged later.

Catherine Novak has been a senior associate editor for Best’s Review Life/Health and Property/Casualty editions, a contributing editor for The Risk Retention Reporter, and a freelance writer for Risk & Insurance magazine. She also writes general feature articles.