How to Evaluate Fine Art & Collectible Claims

Adjusting claims involving damage to fine art and collectibles caused by destructive weather, like floods and wildfires, may seem like a daunting task. Not so, says Heather Becker, CEO of The Conservation Center located in Chicago, Ill. Adjusters can use a decision methodology to make the best possible, most cost-effective decisions when it comes to repairing or replacing art and collectibles.

It’s relatively easy to determine pre-versus post loss issues, according to Becker.

Tools such as a microscope, UV light, infrared, X ray, and forensic analysis can be used to detect condition history and determine a timeline for when the damage occurred.

Much can be detected by microscopic analysis before other, CSI-like, tools come into play.

Becker cites an example of a painting that came in after a hurricane. “It had several tears and holes in the surface, as well as streaking down the front of the painting from the water damage. It was determined by looking at the holes under a microscope, that the fibers of the tear areas were actually old tears, meaning they were dirty, they were covered with a little bit of grime, they were dusty, which means the tears had been there for quite some time,” says Becker.

Though the tears were found to exist pre-loss, the water damage was determined to be related to the hurricane.

Another example involves a light soot claim with a piece that had been in the home of a smoker for several years. “There’s a very noticeable level of nicotine on the surface. And then the soot layer from the fire claim might be sitting lightly on top of that,” says Becker. “And it’s quite easy to detect under a microscope, the difference between the two. Obviously, that nicotine layer is pre loss and the light soot layer is related to the claim.”

In addition to art mediums, high value items can range from vintage cars and wine to emerging collectibles.

According to AXA Art Insurance’s director of claims, Colin Quinn, the process for adjusting a wine loss is similar to adjusting any other type of collectible claim. “The insured is contacted by our adjuster immediately after we have been notified of the claim and all relevant documentation is secured including photographs, purchase receipts and appraisals. We would also conduct an inspection of the climate control system for claims involving wine spoilage,” says Quinn.

The handling procedure for emerging collectibles requires research unless the agreed value of an item is determined at the onset of coverage.

“To avoid discrepancies in valuation the insured may wish to have the collection insured on an agreed value basis. Under this scenario the insured and insurer are in sync with the values at the policy’s inception. If the insured chooses a current market policy there are numerous online auctions and trade publication appraisal services… that can establish values on items as diverse as vintage dolls, model trains, military and sports memorabilia,” Quinn says.

Value in Hiring a Conservator

There are several ways a conservator can assist claim adjusters in evaluating fine art and collectible losses. Becker points out that conservators can do the following:

• Identify pre versus post loss damages;

• Identify condition history;

• Identify previous alterations to a work of art;

• Identify what can be restored;

• Identify inherent vice (Becker defines this as when something is made a certain way, it inherently will have problems that may age the piece faster, because of the way in which it was made);

• Identify living artists’ rights;

• Identify triage options that can minimize claim costs;

• Identify mediums and materials; and

• Identify potentials for betterment;

However, it’s important to note that conservators are not appraisers or authenticators.

“Authenticators authenticate that it’s by a certain artist, and appraisers identify the value of the piece. Conservators should not be involved in either, because it’s considered a conflict of interest. But the one thing a conservator can tell you is, technically identifying the medium of the piece,” Becker says.

The medium refers to the materials used to make the piece. A common issue arises when an owner thinks they know what they have when it may be a reproduction. “It could be a piece that was falsely created and replicated by another artist,” says Becker.

Because of the confusion regarding identification, one of the first things a conservator will do when an item arrives in the laboratory is look at it closely. This examination includes the front, back, sides, and all of the materials. Using a microscope and a black light, they can help determine the medium, materials, and artist’s techniques.

Consider Living Artists’ Rights in Evaluation

A relatively new concern for adjusters when dealing with a work of art concerns living artists. The artist has the right to consent regarding what a conservator suggests to do to their piece.

“So, if a claim happens and a conservator receives a piece, and the artist is still living, theoretically, they should contact the artist or the artist’s foundation and review their suggested approach for consent by the artist, studio, or foundation,” says Becker.

AXA’s director of claims, Colin Quinn, agrees.

“The artist participation in the claims process is encouraged by the Visual Artist Rights Act of 1990 (VARA) which serves to protect the artist work and allows the artist to have his or her name removed from a work he or she created in the event that the work is distorted or otherwise changed, as indicated when the process of doing so would be harmful to the artist’s honor and reputation. Since we work closely with the art community we are respectful of the artists’ rights and endeavor to work with them during the claims process to ensure that the work has been restored to the artists’ original intent,” says Quinn.

Decision Methodology

There are many factors involved in evaluating a fine art and/or collectible claim. As a result, Becker recommends a series of questions to aid in the claim evaluation process. The decision methodology contains several questions:

1. Was the item scheduled? If so, with blanket limits or individual item limits?

2. What value basis was used in the policy – agreed value, fair market value, retail replacement value, actual value? If value needs to be established, proceed with appraisal.

3. Is the piece authentic?

4. Can the piece be repaired? If so, what will repairs cost?

5. Is diminution in value anticipated after repairs? If so, to what percentage?

6. Does the cost of conservation plus diminution in value exceed the value of the piece?

7. If yes, the item should be considered a loss and salvage options can be considered. If no, conservation should be considered a viable option.

8. Secure a condition and treatment proposal from a professional conservator and proceed with treatment.

9. Conduct post-conservation inspection to assess if diminution in value occurred.

10. Receive post-treatment report from the conservator for file documentation.

Triage Savings

With high value art and collectibles, it’s vital to mitigate damage immediately.

When LaSalle Bank suffered a fire, there were 4,000 significant works of photography scattered throughout. Becker and her staff immediately triaged several pieces that were wet and covered with soot and mold. Inside the lab, they opened every single one of the frames, took the photographs out of the framing materials and removed the hinges. The damage was stabilized temporarily until claim decisions were made.

She says minimal expenses were incurred in order to curtail future costs of what would have been much more extreme damages, had the photographs continued to remain inside the frames while further decisions were made.

Another example of using triage as a way to minimize repair costs involves an Early American portrait painting damaged in a hurricane.

“Someone had a piece that was literally floating around in four feet of water for about six hours, and the paint was lifting and flaking considerably by the time the water was removed. We attached what’s called Japanese tissue facing which took less than an hour, and essentially that just stabilizes the paint right where it is,” says Becker. “It’s a temporary stabilization method, and that allowed the adjuster to proceed and go through the proper claim processes. It was determined about three weeks later that it was viable and worthy of treatment and we were approved to proceed.”

She says if the piece had been left as it was, it might have been considered a total loss at a value of almost $28,000.

Becker estimates conservation saves the insurance industry about 80 percent. “If you choose conservation and you’re able to return the piece to pre loss condition, without any diminution in value, there’s going to be a tremendous savings there for the carrier,” Becker says.

Art Education Equals Customer Satisfaction

In addition to the restoration experts, AXA emphasizes a claims staff that has a strong educational background and work experience in art. “This has helped us communicate effectively with our insureds and ensures claims are handled professionally and expeditiously,” says Quinn.

While much of the insurance-related work Becker sees is related to water and fire damage, she admits she’s seen just about everything. “We’ve seen food thrown on art. We’ve seen bullet holes. We’ve seen dogs chewing up precious significant things. We’ve seen children who have taken their crayons and written all over a major work of art.”

Photos courtesy of The Conservation Center