Recently, I have been seeing much more work for insuring quality fine and decorative art collections than I have over the past several years. I have asked about this here on the AW Blog, and with other appraisers and all are saying they too are seeing an increase in appraising fine art collections. Dont take me wrong, I am not complaining, as the work is good and I also get to see some wonderful works and pieces.
Last week the Wall Street Journal published an interesting article on damaged art, restoring art and dealing with a loss of value. The article notes that after damage is repaired, appraisers have the difficult task of assessing the loss of value. The article even notes when there is a dispute between appraisal value of client and insurer there is the process of arbitration and bringing in a 3rd appraiser as an umpire. I have been a court appointed umpire in the past, and it certainly is an interesting process.
This is a good article to archive and have on hand for reference when working on a damage claim with an insurance company or the insured.
The Wall Street Journal reports
Source: The Wall Street JournalInsurers of fine art hear lots of excuses in their line of work. Almost as many as third-grade teachers.
The movers dropped it. A pipe broke and sprayed water all over it. Somewhere, a dog is likely to have eaten at least one collector’s favorite painting.
But when it comes to protecting the value of one’s art, the manner in which a piece was damaged doesn’t matter. What matters a thousand—perhaps a million—times more is how the owner can go about restoring the piece’s value—or recouping it if the piece is deemed a total loss.
Protecting art’s financial value isn't as simple as it might seem. There is a “book” value to your car, which helps insurance companies decide if the cost of repairs will be higher than the overall value of the vehicle. The worth of damaged art, decorative arts and antiques is more elastic and may lead to disputes between owners and insurance companies.
“It’s always a delicate conversation,” says Steven Pincus, president of the New York art brokerage firm DeWitt Stern.
What follows is a look at what every art owner should know about damage and restoration in the world of private art collecting, and how owners can best protect their pieces—and pocketbooks:
Assessing the damage
When everything goes smoothly, an insurance adjuster will look at the damaged artwork, then a conservator brought in by the insurers will see if the object can be repaired and at what price. Assuming the cost isn’t significantly more than the piece’s value, the artwork is quickly handed over to the conservator to begin treatment.
“You don’t want a long delay, because that could make problems much worse or even permanent,” says Dorit Straus, retired world-wide fine art manager at Chubb, a leading fine art insurer.
After repairs are made, an appraiser with expertise in fine art or a dealer in the particular type of art will evaluate the object to determine if the value of the now-repaired work’s value has declined and by how much.
This is where the difficulties can start.
“There is no mathematical formula,” says Chicago-based insurance adjuster Robert O’Connell. “It can be a small tear in a canvas, but it matters more if the tear is at the center of the painting or at the edge.”
A fine-arts insurance policy generally will cover the entire cost of restoration and, if there is, say, a 30% loss of value because of the damage, the insurer will pay the policyholder 30% of the insured value.
When there are disagreements about values submitted by an appraiser for the insurance company and another by the policyholder, many fine-art-insurance policies have arbitration clauses that bring in a third appraiser to assess both valuations.
With heavily damaged older artworks, the insurance industry’s fine-art appraiser or expert may choose not to say that an object has been destroyed, “unless it is no longer recognizable,” says Chubb’s Ms. Straus. “Even heavily damaged works may retain cultural significance, although determining what that works out to in actual dollars isn't easy.”
Deciding if a work can be repaired and if it retains any value can be further complicated when the artist is still living. Some artists may offer to repair their own works or want to select and supervise a conservator, while others might hold the view that their creations would never be the same, demanding that their names not be associated with the artworks.
Medium matters
The success of restoration efforts can sometimes depend on the medium.
“Photographs are exceedingly difficult to repair,” says Albert Albano, executive director of the Intermuseum Conservation Association in Cleveland. “Once the homogenous surface has been disturbed, the damage is extremely difficult to camouflage, leading to a noticeable decline in aesthetic value.” That presumably will affect market value as well.
With paintings, on the other hand, conservation may be done so well that damage won't adversely affect the piece’s fair market value. It depends on the type of treatment (a cleaning often is relatively minor while relining a canvas is significant), the amount of restoration necessary and the methods used.
Buyers beware
For owners of a once-damaged but now restored work, the piece’s resale value can be of greater interest than its insurance value.
Past efforts at restoration generally aren't immediately apparent to the naked eye, as conservators try to make their work and that of the underlying art seamless. There is no Carfax for works of art, no place to go for reports of hidden damage and repairs.
At auction houses large and small, objects are sold “as is.” Sotheby’s conditions of sale suggest that “[p]rospective bidders should inspect the property before bidding to determine its condition, size, and whether or not it has been repaired or restored.”
Both Christie’s and Sotheby’s will provide condition reports on request for individual lots, but they tend to be very brief and full of disclaimers.
According to New York City gallery owner Michael Rosenfeld, “Few collectors ask if the paintings they are interested in buying were ever restored. I don’t think it crosses their minds.” That doesn’t mean they don’t care once they find out, however, which is why Mr. Rosenfeld says he makes a point of discussing the condition of a work of art with prospective buyers.
Some collectors might want to make their own determinations. Repairs often will show under a black light, a hand-held device emitting a low-magnitude ultraviolet radiation that causes certain materials to fluoresce. Materials applied later won’t glow as much. Some collectors purchase ultraviolet lights, while others will bring in a conservator to examine artworks under consideration.
Once collectors learn about any restoration, Mr. Rosenfeld says, some lose interest, while others use the information as leverage to negotiate a lower price.
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