The Vulnerability of Art: Collection Risk Management Tips

[ RISKMANAGEMENT] By Michelle Impey, Fine Art Director, Fireman’s Fund Insurance

The Vulnerability of Art: Collection Risk Management Tips

When I visit the homes of high net worth clients to assess their art assets as the Fine Art Director with Fireman’s Fund Insurance, providing loss prevention advice is my primary objective. Whether it is a passion, investment, or family inheritance, every collection has a value worth protecting. Here are some collection risk management tips that will help preserve the future value of all types of collections.

Importance of a Collections Policy

First, I want to stress the importance of a collections policy. It offers broader coverage than a homeowners policy; such as flood protection, breakage of fragile items, and mysterious disappearance/theft of jewelry and other collectibles. For example, a homeowners policy will typically limit mysterious disappearance of a jewelry piece to $5,000. A collections policy also provides worldwide* coverage and there is no deductible should a loss occur.

Considerations for Collection Risk Management

Transportation Even though accidental breakage and damage in transit is the top cause of fine art losses, the standard liability limit in the transit business is only 60 cents a pound. If you ship a 10lb. painting valued at $500K, the shipping company will likely only cover up to $6 of damage. Fortunately, a collections policy provides worldwide* coverage for items in transit and automatic coverage for newly acquired items. With the globalization of the art market, these coverages are especially important for active collectors. But whether artwork is shipped abroad or just across town, an experienced art packer and shipper should always be hired. For ground shipments, confirm that there will be two drivers and the vehicle is equipped with air-ride suspension, temperature control, and a security system. Depending on the territory, some companies will sub-contract out the service. If they do, you should make sure that a reputable sub-contractor will be handling your valuables.

Proper installation and mounting Accidental breakage does not only occur while items are in transit. Many accidental breakage claims result from items simply falling off a wall or being knocked over. Often when I meet with a collector, I provide advice on how to improve the integrity of an existing installation. The hardware used needs to be appropriate for the weight and size of the piece, and should have at least two to three points of contact. In earthquake-prone areas, there are specifically designed earthquake hooks for hanging works. On one visit, I noticed that multi-million dollar paintings were hanging from nails, with deteriorated picture wires. Plastic coated picture wires can unravel and copper wires can wear over time. I recommend hiring an art handler/installer to periodically check the installation hardware to assess if it needs to be upgraded. The installation of a three dimensional work, such as a Donald Judd sculpture, also requires specialized expertise. Although brushed stainless steel may appear to be a durable material, this type of sculpture can easily tarnish and sustain significant damage if accidentally dislodged from the wall. For this reason, it is important to hire an art installer who is knowledgeable about the artist and medium that they are handling.

Select a safe location Avoid hanging paintings on exterior walls in your home. Due to minimal insulation in the walls of many buildings, exposure to severe fluctuations in temperature and humidity is a potential risk. In some cases, condensation and even mold growth can occur on the interior surface of the wall. One simple preservation step is to attach a protective backing board to a painting (a qualified framer or conservator could affix one to the stretcher), which will reduce exposure of the canvas to rapid environmental changes, keep out dust and protect against damage during handling. Air circulation behind a work is beneficial, and there are spacers for this purpose. One resourceful collector used wine corks as spacers, which protected his valuable work on paper from temperature extremes, and even buffered it from water damage when the upstairs washer leaked. When uncertain about a particular piece, seek the advice of a conservator.

*Coverage is not provided in foreign countries where not permitted by law. Environmental conditions Don’t store artwork in basements or attics. Although gradual deterioration is not a covered loss, it is valuable to the collector to have these exposures pointed out. Works on paper are especially susceptible to damage when exposed to natural and artificial light. Light causes the oxidation of cellulose which causes the paper to dis- color and weaken. One collector told me how her Matisse drawing completely faded after being exposed to sunlight over a period of time. Avoid direct sunlight, install UV film on windows, and consider framing works of art with a protective glazing. For artificial lighting, indirect and low voltage fixtures with UV filters are often recommended.

Access to the collection

Displaying items in direct traffic areas can leave them vulnerable to accidental damage. To prevent improper handling, outline specific housekeeping instructions on how to work around valuable works. Whether it is breakage or exposure to harmful cleaning products, damage during the housekeeping process is a common occurrence. Windex can corrode the patina on a sculpture and even non-direct contact with cleaning agents can be harmful.

One conservator recounted how a housekeeper’s routine cleaning of a piano caused a chemical residue to form on a painting displayed directly above. If some items must be handled, prepare in advance. For example, gloves should be worn when handling metal objects because hand oils and perspiration can cause corrosion. Beware of how pets will behave but know that some losses are fortuitous. One collector’s British landscape painting was damaged when their dog jumped at the canvas to attack a rabbit depicted in the painting’s hunting scene.

Alarm Protection

An estimated $6 billion worth of art is stolen worldwide every year with a low recovery rate. The majority of thefts occur at private residences, and most are believed to be inside jobs. To prevent theft keep alarm systems active (it is surprising how many collectors don’t). Conduct background checks and consider setting up separate alarm codes for staff. In addition to traditional alarm contacts, there are RFID tags that monitor the local positioning of an asset and detect movement and vibration. If a collector does not want to alarm works of art, they may want to consider security hardware, which attaches the frame to the wall and locks it in place.

After installation, the only way to remove the frame is to use a special security wrench designed for that particular piece of hardware. No security hanging system is infallible, but it can reduce casual theft and tampering. Fire alarm systems should also be designed with the collection in mind. Smoke detectors should be installed in/near all areas where there is a high concentration of valuables. Oftentimes, smoke detectors are installed near the bedroom areas but not in the formal rooms of the home where the collection is typically displayed.

Loans

Before loaning items to museums, I advise clients to first get an updated appraisal. Review the museum’s insurance policy to confirm it offers ‘wall-to-wall’ coverage, meaning there is coverage from the time that it leaves the insured (taken off the wall) until it is returned. This includes coverage during packing, shipping, installation and display. As we learned above, understand how they will pack and ship the artwork, and ensure it will be displayed properly. Request a facility report of the museum, which evaluates the security and protection of the venue. Request a condition report before and after the exhibition, that way there will be a record of any existing damage and it will be easier to assess if any damage occurred during its display. I recall one collector who thought one of his works had been damaged while on exhibition. When the art conservator reviewed the prior condition report, it was determined that the small section of missing paint had been there previously, and in fact it was the artist’s intention. It is important to have an art conservator who has expertise in the particular artist complete the condition report. With some contemporary works especially, it is oftentimes difficult to distinguish between the artist’s intent and actual damage. One consideration for a collections policy is whether or not there is automatic coverage for scheduled items on loan to museums or exhibitions worldwide with no reporting requirement. A few years ago, Picasso’s ‘The Actor’ was on exhibit at the Metropolitan Museum of Art in New York when a woman taking a class accidentally fell into the canvas, causing a 6-inch vertical tear along the lower righthand corner. When the painting returned to the Met’s walls it was behind plexi-glass. Most collectors don’t realize that they can specify how the artwork is displayed when it is loaned to a museum.

Documentation aids recovery

Should damage or loss occur, remind clients that documentation aids recovery. It expedites the claims process and aids retrieval efforts. Backup copies of documentation should be stored at a secure offsite location. These include (but are not limited to): appraisals, invoices, certificates of authenticity, photographs, provenance details and exhibition history. The collection should be periodically reappraised, which is typically recommended every 3 – 5 years. All these records can be effectively organized and stored using one of the several collection management tools on the market.