We posed the following hypothetical scenario to a few reputable insurance companies. The Art Cellar Exchange advises that art collectors perform due diligence when choosing a carrier for the appropriate coverage of an individual artwork or collection. Each company and policy will serve different needs based on the artwork and the owner. The following are their responses to the hypothetical scenario:
A work of art was purchased for $70,000 at a well-respected gallery. The owner had it reappraised after three years as the artist had had a museum exhibition and several highly publicized shows. This new appraisal, done by an ASA certified appraiser, was for $120,000. The scheduled insurance policy was readjusted to $120,000.
AXA Art Insurance Corporation:
We recommend appraisals when items exceed $25,000, but such appraisals must be done by an appraiser with relevant experience. For example, ASA offers appraisals on Gems and Jewelry, Machinery and Technical Specialties, Personal Property and Real Property. We will verify the credentials of the appraiser doing fine art appraisals. In this example, we will accept the appraisal showing a $50,000 increase in value if done by a qualified appraiser.
Our coverage can be customized to fit many situations but the basic coverage is an agreed value policy. In this example, we will honor the contract and pay the $120,000 loss even though the market no longer supports such a valuation. In reality, we maintain a database of our Insured's collections, whereupon renewal, all policies and their respective collections are reviewed for satisfactory values. If we see that an artist's values are not supported in the secondary market, then we will request an updated appraisal to show the lower value. We will not stay on risk that is in an over-valued situation. The opposite is also true. If we see an artist whose values are increasing in the secondary market, we will recommend new appraisals to re-establish agreed values.
CHUBB Personal Insurance:
If the policy was written on a scheduled amount basis, the
customer should expect to receive the amount that it was scheduled for and
for which he paid premiums (unless there are questions of fraud or other
criminal actions). On the other hand, if there was a partial loss, the
depreciation of value would be based on the current value of the work,
which is $ 50,000.