A Certificate Of Insurance And Why You Need To Get One When You Loan Out Work

by Steven Pincus, DeWitt Stern Group


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There are many misconceptions regarding Certificates of Insurance. The following information may help to provide a greater understanding of their proper and intended use.

It is common practice in the art world for a consignor/lender to request a Certificate of Insurance from the consignee/borrower when lending works for sale or to a museum for an exhibition. This Certificate of Insurance should evidence that the consignee is insuring the works on loan.

Certificates of Insurance are documents issued by an insurance company or their authorized agent or broker which evidences that an individual or an entity has specific insurance coverage in place at that time and for the duration of the loan. Certificates of Insurance do not extend coverage or provide any rights to the consignor/lender or a third party; only an endorsement or a rider can make specific changes to an insurance contract. Such an endorsement may name a third party as an additional insured, a loss payee; it may waive rights of subrogation or rights of recovery; all of which are common requests of cosigners/lenders. Only after specific policy changes have been made via an endorsement, can a Certificate of Insurance evidence to the consignor/lender that they have any rights under an other’s insurance policy.

Certificates of Insurance can vary in nature and format. As a recipient of one of these documents, the lender should review it carefully in order to determine that the specific insurance coverage amounts and the consignor/lender’s rights are being evidenced properly. Your insurance broker can assist in this review to help ensure the Certificate of Insurance evidences the insurance coverage that the lender requires.

The Certificate of Insurance should be issued in conjunction with a loan agreement. The loan agreement provides details of the borrowers’ insurance responsibilities for the duration of the loan and/or until the work(s) are sold or returned. It is customary for the consignee/borrower to provide insurance coverage for the objects or works that are on loan and for which the consignee/borrower is responsible and/or are in their care custody and control. This responsibility usually includes the transit on a round trip basis; also known as wall-to-wall or nail-to-nail.

In addition, a condition report should be completed by the consignor/lender on all works involved prior to the consignment/loan. The consignee/borrower should also prepare a condition report of the works immediately upon arrival to establish the condition of the works. These reports can become valuable records that can be referred to at the time the works are returned to the consignor or in the event there is a claim for a loss or damage.

As the consignor/lender you want a Certificate of Insurance issued on your behalf evidencing that the consignee/borrower has insurance. The Certificate of Insurance should reflect the following:

1. The Insurance Company

2. Consignee/borrower's policy number and policy effective dates

3. Reflect "all risks" fine art insurance coverage

4. List the specific works and insured value for each

5. Evidence wall-to-wall coverage from the time the works are removed from their normal place of repository until returned

6. Name the consignor/lender as an additional named insured