PATRIMONY — JULY/AUGUST 2010

Art Insurance... and a recent lawsuit — Lausanne
Cheong Kwon, 10 July 2010

I recently became privy to information concerning a lawsuit which involves two important (*) figures in the Geneva art community : Cynthia Odier of Flux Laboratory and Swiss based artist BillyBoy*.

In April of 2009, (see Daté archives Avril 2009) BillyBoy* was commissioned by Flux Laboratory to present a performance, lecture, and art installation which comprised of 30 "Mdvaniiism" artworks. The show was called "Identity" and was about keeping one’s identity and artistic integrity when creating art for a soulless corporation, notably Mattel Toys, Inc., creator of Barbie, with whom BillyBoy* created many now iconic innovations and art concepts (*). The performance at Flux was packed with people and the event seemed to be a great satisfaction to both parties. At the end of the exposition, however, it was found that four of these works were irreparably damaged and Mrs. Odier did not insure the works for their full value, as stipulated in the contract, insuring them for only 25% of the full value, 2,500 CHF for artworks priced at 10,000 CHF. It is also said that she contested their original valuation, and stated that the works were not worth their market price, although this did not prevent her from acquiring one for her own collection, at a 20% discount of the agreed upon retail value, for 8,000 CHF.

Art appreciator, Thomas O’Sullivan, who has been following contemporary art in Switzerland for the last twelve years comments, « I was told by people who went to the show that Mrs. Odier was delighted to offer very reasonably, or actually low priced pieces by BillyBoy* for the exhibition, and the asking price was lower than a first show exhibition of a young artist, so it can hardly be contested as overpriced... And I know that BillyBoy* has sold many of these works since the show for 10,000 CHF. They have already increased in market price and are important works in his dialogue. His smaller drawings in galleries, bought on the secondary market, sell regularly. Geneva collector and one of the founders of Mamco, Anne-Shelton Aaron purchased a work in 2008, a Mdvanii sculpture doll from the Mudac museum exhibition. »

Apparently, exactly which artwork was to be acquired by Mrs. Odier was also written into the contract, and when, after the close of the exhibit, she chose to take another work on her own volition, a further rift developed between the artist and gallerist. BillyBoy* is suing Cynthia Odier for the full value of the damaged artworks, lawyer and emolument fees.

BillyBoy’s attorney and Flux Laboratory were contacted, and while it was confirmed that the case is indeed under litigation, both parties were unable to provide further comment.

Being given news of this lawsuit has prompted me to cover some art insurance tips for anyone, public or private, who works with or owns art. As it is oftentimes the artist who has little recourse in these types of cases, (since most artists tend to have limited resources to protect their interests), I contacted Katja Zigerlig, Director of Art Insurance at Chartis Private Client Group to ask a few questions.

Cheong Kwon : I’ve heard the comment, “no one in the art world insures artwork for it’s full value.” Is that true? Is there a valid or explanatory excuse for this ?

Katja Zigerlig : No, this is not true. At our company we would never insure a piece of art for only 75% of its value. A client may choose to have a deductible, thereby sharing in the financial risk of a loss, yet also decreasing their insurance premium. Yet if clients select this option, we would not refer to it as not insuring to full value... a comprehensive arts insurance policy is a fundamental form of asset protection for the collections for which they have spent so much time, money and dedication. Yet art insurance is an elective choice, not a requirement such as automobile insurance so some people may choose to "self insure", but that would be the minority, not majority of serious collectors. Sometimes collectors, (galleries), or museums will insure their collection, but not to the total sum of all the artwork owned. For example, a museum may have 5 million euros of art in one building, and 3 million euro in a fine art warehouse many kilometers away. The museum may have a policy up to a limit of 5 million euro, because statistically, that is their greatest exposure in any one location. This is a concept we call PML, probable maximum loss.

CK : How is the true value of a work determined by the insurer ?

KZ : We do not determine the value. Most collectors submit invoices or receipts from galleries and auction houses to justify the “value” of the painting. For items that were purchased many years ago or inherited, we always recommend clients get an appraisal from a qualified appraiser. Neither the client nor the insurance company should set the value because both parties have financial interest in the works.

CK : How does the market and insurance valuation play off of or effect the other ?

KZ : I should also add that the “value” of a piece of art and the “amount” paid out in a loss can be two different numbers. The amount paid in a covered loss to a piece of art depends on the valuation clause in the insurance policy. There can be scheduled value, which usually refers to a list of the art items and the values of the pieces. Or there can be a "blanket" amount, with a maximum limit per item. For example, a collector can have a blanket coverage of 1 million euro, with a 20,000 euro maximum per item. So in the event of a loss, the artwork will be valued by an appraiser or arts adjuster for the current market value. The client will be paid up to 20,000 for that item, but if the valuable is higher than the limit amount, there is no further compensation. Obviously the client needs to be comfortable with the limit and be aware of the general value of the artists they collect.

CK : What safeguards are in place for collectors and artists to protect the value of their works ?

KZ : If a client has a blanket policy they have some protection because the valuation clause is current market value. However, that works only for smaller valued items due to the limit per item like in the example I gave about. Some insurance policies may have an inflation factor in which the valuation on the policy is agreed (or scheduled) value, up to (for example) 125% of the scheduled amount. So in this example the collector is covered up to a market fluctuation of 25%. We always recommend that clients get updated appraisals if they feel a particular artist’s work has risen dramatically in value.

CK : Geneva gallerist Philip Cramer stated that he insures his works through a global insurance, and then individual pieces are insured specifically when loaned out or travelling. Is this a common way of insuring entire collections ?

KZ : - Galleries have policies that are completely different from a private collectors policy. Not sure what he means by "global insurance". It can refer to worldwide coverage. Many policies have limits for worldwide coverage. For a gallery sending and receiving art to and from the world, worldwide coverage is important. Coverage for transportation is also important. In general, galleries have blanket policies, and the works tend to be insured for wholesale price plus 20% or retail price minus 30%. But an artist should always be certain to stipulate in the contract with the gallery, the retail pricing of the works.

CK : What advice would you give to artists about insuring their own work ? What advice would you give to someone when things go wrong and a claim has to be filed ?

KZ : - There are specific art insurance policies for artists. The valuation clause for artists’ work is different than for a collector’s policy so I encourage artists to speak with an insurance broker or agent to discuss the different options available to them. One of the biggest challenges an artist or collector can face is when their artwork is given to other people or an institution to display. Getting written loan agreements is one of the most important steps to protecting one’s art when it is in someone else’s care, custody and control. It should state the duration of the loan, the value, shipping and transit details as well as responsibility for insurance. When you file a claim, have as much information as possible about the artwork and speak with your insurance broker/advisor on the procedures that will take place.

(*) Nota bene : Daté magazine makes grow hyper subjectivity ; ideas and opinions involve only the authors themselves.

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