By STEVE YAHN, a veteran business journalist in New York
Those lessons learned by the art world in the aftermath of 9/11 are wide-ranging and deeply etched, insurance and legal experts say.
"We learned that fateful day two important risk management protocols: keep excellent records and keep a copy of the records off-site," said Lynn Marcin, Baltimore, Md.-based senior vice president of Huntington T. Block Insurance Agency Inc. "Ten years later, we still do not know how much art was lost due to the loss of records.
"Not only is the recordkeeping going to assist the loss adjusters in determining what the actual loss amount was but it would be helpful in replacing items, when possible, in the case of multiples such as prints, photographs or cast sculptures," Marcin said.
Eric S. Fischer, Potomac, Md.-based senior vice president for Willis, Fine Art Jewelry and Specie, concurred with Marcin on the lesson learned about the importance of keeping records off-site."The human tragedy was very sad, of course, but what was fortunate for us on one particular account of ours was that the woman we dealt with kept the records off-site. Once everybody got their feet back on the ground, then the adjusting was a very straight-forward process--just verifying what was in the tower and writing a check."
Regarding lessons learned, Fischer said, "a big issue was an accumulation issue. At the time, I don't think carriers realized how much accumulation was in each of the towers. I don't think anybody perceived that if they had something on the 100th floor and something on the 30th floor that the potential for losing both at the same time was as great as it was. They're doing a much better job now. Today, especially in New York with a lot of art in warehouses, a lot more attention is paid to accumulation in those buildings."
Another issue that has become a fact of life in post-9/11 art world coverage is terrorism cover. "Prior to 9/11, no one thought of terrorism coverage in America," said LeConte Moore, New York-based managing director and art world specialist at Dewitt Stern Group Inc. "No one considered it. And that's why all the policies covered it--the claim, the building going down and all that because it wasn't war.
"When it comes to art insurance, terrorism can be excluded on certain policies because the client doesn't want to pay for it," Moore said. "It was never charged for before because it was never broken out. Now there's a whole separate charge for it.
"I have a lot of clients who don't buy terrorism coverage," Moore said. "Some of them say, 'I don't think anybody is going to blow up a gallery in Chelsea.' But other clients may have a financial contract in which they're required to have terrorism coverage."
Terrorism coverage can be very expense, Moore said. "If you have a very large art exhibition, for example, and the lenders to the exhibition are putting up works ranging in value from $800 million to $2 billion in one building, then the cost of terrorism coverage could be 25 percent of the insurance," Moore said.
Another lesson underscored by 9/11 is the crucial importance of regular condition reports and appraisals done on a regular basis when a high-risk facility is involved.
Art law expert Scott Hodes, senior counsel at Chicago-based Bryan Cave LLP, recommended that these reports and appraisals be done annually.
Hodes cited the example of a corporation that had a significant photographic collection housed at the World Trade Center that had not been re-appraised in a number of years and was undervalued. "The lesson to be learned in this cased was to have condition reports and appraisals done on an annual basis because what occurred here was that after the loss it turned out it was impossible to re-create what was destroyed," he said.
Renowned art appraiser Gayle M. Skluzacek, who appraised the World Trade Center plaza art both before and after 9/11, said that art should be re-scheduled at a maximum of every five years, and preferably every two years.
Skluzacek, who is president of New York-based Abigail Hartmann Associates, said: "If the market is hot for what you're collecting, I would say every two years. The important thing is not to just take the purchase price, but to periodically review the whole collection."
And it's not just art work that should be appraised, Skluzacek said. "You should also appraise antiques, and there could be glass and collectibles you should be concerned with." The value of antique stain glass has soared in value in recent years, she said.
Dorit Straus, New York-based vice president and worldwide fine art manager at Chubb Group of Insurance Cos., said that above all else a collector should make sure her or his art collection is properly documented."Document, document, document," she said. "Good documentation. The name of the artist, the title of the piece, the dimensions and information about the condition of the work. Use the Object I.D. Check."
Related to this, Straus said, is keeping the records on your computer but then backing them up and having the ability to access that information from other computers, including at off-site locations.
"But at the same time you have to have the proper security for that documentation," she said. "You don't want to have it so that everybody knows what you have. Because that kind of information could be very useful to would-be criminals, hackers and so-forth."
Straus joined others in underlining that records must be kept updated. "The art market changes, so it's not one of these things where you say, 'I got it ten years ago, so now I'm fine.' This is part of the risk management process, having a relationship with an expert who does your evaluation,'' she said.
"It may mean that some works go down in value because things change, but over the last number of years art has appreciated, especially if somebody buys good quality."
In another area, Straus stressed that collectors should have good, ongoing relationships with packers and shippers, especially to help when there's a catastrophic situation. "This is especially true in being prepared for such catastrophic situations as hurricanes and other natural disasters where there's some warning," she said. "These shipping and packing companies can make damage-control arrangements on short notice. They'll come in with crates and moving permits from local authorities and move you to a safe place in a well organized fashion."
Lynn Marcin of Huntington T. Block said: "We learned on 9/11 that you cannot create a disaster plan when a catastrophe is in progress. Following that tragedy, insurance carriers required more specific information about facilities, the art collections and whether a disaster plan had been determined."
September 1, 2011
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