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By STEVE YAHN, who has written for and edited national publications for more than 30 years

Renowned art law specialist Scott Hodes has a bold idea for reclaiming five modern masterpiece paintings lost in a daring theft at Paris's Museum of Modern Art collection last spring.

"If they would put up a decent ransom for information on return of the works, you'd be surprised what could come out of the woodwork," Hodes said. "You just don't know what will happen."

In the case of any art heist, the first thing Hodes recommends is being in touch with the Art Loss Registry, an international organization that has a comprehensive database of art thefts.

"This is the most important single thing a museum or collector should do if they have any art work stolen," Hodes said. "Insurance companies work closely with the ALR."

Robert Korzinek, fine art underwriter at Hiscox, the managing agent of Syndicate 33, one of the largest syndicates of Lloyd's of London, lends support to that notion. "Works of art, often unique and invariably quickly identifiable, are some of the best known images in the world," he said. "When an artwork is stolen, that image is almost immediately circulated around the world that it is so hot it is untouchable in the open market."

"However," Korzinek also said, "art works are also a uniquely identifiable commodity in the criminal world, associated with substantial monetary value and an audacious criminal act. This combination means that art can be as collateral for international drugs and arms deals."

Curators and collectors alike face a curious predicament. On public display, in front of millions of people, is the equivalent of tens of millions of dollars for all to see.

That would never happen with wads of cash, but it happens every day with a sculpture by Michelangelo, and painting by Titian or a watercolor by Homer, and so it's perhaps no surprise that law enforcement officials say art is the fourth-biggest criminal activity in the world after weapons, drugs and money laundering.

"Art is created to be seen and to be shown off," Korzinek said, "yet one would never dream of displaying millions of dollars openly in cash in one's home, an irony that was not missed by Andy Warhol when he produced his series of silk screens of dollar bills."

Korzinek and Hodes highlighted the crucial balancing act that museums and galleries must play when displaying works of art.

"Museums and galleries must carefully balance the need to make works in their collections as accessible as possible while also ensuring their safety," Korzinek said. "Add to this the budgetary constraints faced by many public institutions, for which a new alarm system or more guards mean fewer acquisitions or exhibitions, and their predicament is clear."

No one would espouse locking away public collections in a bank vault. Doing so would deny the public important parts of their heritage, and obviate the need for museums. Yet, serious effort is still required to ensure that would-be thieves are frustrated in their efforts whenever possible.

"Specialist fine art insurers such as Hiscox continue to work with museums to ensure that reasonable and practical security provisions are put in place and that insurance is available for when the worst happens," Korzinek said.

The Paris art heist, in which a thief boldly jumped through a reinforced glass window in the middle of the night, underscored how easy it sometimes is to walk away with millions worth of precious object.

The five stolen masterpieces, worth tens of millions of dollars, are still at large. They include Pablo Picasso's Cubist "Dove With Green Peas," Pierre Matisse's "Pastorale," Georges Braque's "Olive Tree Near l'Estaque," Amadeo Modigliani's "Woman on the Range," and Fernand Leger's "Still Life with Candlesticks."

The theft also pointed to the particular loss-prevention balance museums need to strike between electronic surveillance and human guards roaming galleries and halls.

A SPLIT IN COVERAGE STRATEGY

"If a museum security system is not functioning and this is known to the museum, in certain insurance policies the museum may not be covered," said Gregory J. Smith, executive vice president at New York-based Berkley Asset Protection Underwriters. "The museums are attesting that the level of protection will always be the same throughout the term of the policy.

"What is the safest risk, an institution which relies on guards to patrol the site or an institution which relies on electronic security, both alarms and closed circuit TV?" Smith added.

It's a good question. In the end, museums face a balancing act. An electronic security system costs more than human guards, at least in the beginning. But after a few years, the cost of the guards outweigh the cost of the electronic surveillance system.

Guards can and are often used in conjunction with electronic systems, which is the ideal mix, Smith said.

"If the guards are overcome and the alarm rings internally only, no one will ever know about the burglary until the next morning," Smith said. "So I believe there should be a mix of electronic and human security."

Another issue raised by the Paris heist was the difference between how many major European art museums handled insuring their collection and how their American counterparts go about handling the insuring of their collections.

"It is correct that within a number of European countries museum collections are government insured, as was the case with the large loss in Paris in which the collection was not insured commercially," said one leading London art broker.

"Museums differ enormously in their approach to insurance," Korzinek also said. "Often museums will buy insurance to cover the costs of restoration in the event of damage to works of art, or costs of recovery in the event of theft. But most European museums do not buy cover for the market."

American museums, Korzinek added, "often view insurance somewhat differently. Trustees of U.S. museums often consider it their responsibility to protect the financial asset that the protection represents. As a result, a great many American museums purchase an 'All Risks' insurance policy covering works of art for their full market value against all major perils."

Diane Jackson, chief operating officer and director of finance at Huntington T. Block brokerage in Washington, D.C., said that writing museum insurance in the United States is more feasible.

"Our policies are very broad," Jackson said. "There's no reason for museums not to insure their collections. Museums in the United States buy a museum fine arts policy which covers owned items as well as consigned items. As long as there's a contract involved indicating a museum is responsible for it, the policy will cover it."

When clients lend works to a European museum, Hodes said he requires the museum to carry insurance where his client is the sole beneficiary.

"Because of the fact that many foreign museums do not carry insurance, I recommend that an American lender, whether an individual or an institution, buy an insurance policy and have the venue that is showing the work pay for the policy," Hodes said, noting the frequent differences between European and American museums on insuring works. "Otherwise, I advise my client not to loan the work."

There is another aspect of loaning art works to museums that can often be overlooked, Hodes said, and that is that some museums are not equipped to handle delicate works of art and don't insure these works.

"I can tell you a collector has to be warned that not all museums are created equal," he said.

October 15, 2010

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