As the attention of the art world moves from the New York-based auctions in November to Art Basel Miami Beach in December, high-net-worth collectors buying and selling art are focusing intently on obtaining a good price. While the bidding and negotiations will no doubt demand most of their attention, they also need to be thinking about keeping their art safe and properly insured as it moves between locations.
Risks have increased with the expansion of the global art market. To reach a larger number of potential buyers, auction houses and dealers are more likely than ever to display art at multiple locations, including a growing number of art fairs around the world. Moreover, each move between venues could also involve a stint at a storage facility.
The sheer volume of art exchanging hands heightens the risk of improper handling and accidental damage. The pace of the market also means specialized art shippers will be in high demand, and perhaps unable to transport art on the exact date requested by the collector. Anxious to get their prized pieces back home, buyers may be tempted to use standard shipping companies.
How art is packed and shipped between locations deserves especially close attention. Even though time spent in transit may represent less than 1% of the artwork’s life, transit-related losses account for 18% of all art insurance claims, according to an analysis by ACE Private Risk Services of the private art collections it insures. With the high price tags listed on many works of art, an accident in transit could cost owners millions of dollars if the proper precautions aren’t taken.
Here are the four key steps HNW individuals should take to ensure that their artwork is protected and insured at every stage, from sale to purchase to final exhibition.
1) Insist on a Strong, Detailed Consignment Agreement
A consignment agreement is a vital component to any art sale. This agreement should include an exact time frame for the consignment, terms of sale, and agreement that the title of the work does not pass to the new owner until payment is received in full. Additionally, be sure to file a financing statement under your state’s Uniform Commercial Code to assert your ownership interest, and make sure that the consignment agreement requires approval before re-consigning to another dealer.
The agreement should also specify how and where all of your art will be stored while in their possession. This stipulation is critical. For example, many consigned works were stored in art gallery basements in Chelsea during Hurricane Sandy, leaving many severely damaged. Some art galleries may also store artwork at an off-site storage facility, which could impact insurance coverage. High net worth insurance companies will be able to assess the level of protection that exists at any art storage location and offer advice accordingly.
Lastly, request notification prior to your piece being moved to another location, and obtain confirmation on how it will be transported and packed. Having a lawyer review the agreement and being as educated as possible throughout each step of the consignment process will help ensure a smooth transition.
2) Know Who Is Responsible for Insurance at All Times