Fine Art Collecting: Art Fairs and Other Insurance Underwriting Challenges

Thomas Galbraith
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Interior of Maurice Agis's, Dreamscape (2006) Disaster would soon strike. See video, below

 Seeking – Director for Museum, open 4-10 days a year with hundreds of curators involved, and tens of thousands of visitors. Must be able to cope with logistical nightmares and able to please everybody all the time.  

How many museums are there in the world? Have a guess. I have no idea so email me if you know. My point is there are thousands upon thousands of museums, more than it would be possible to count with any great ease. Museums are, for the most part, continuously in operation. Their time horizon, as a business, is long range. They are afforded the luxury of time to organize, correct, and improve. But, in the case of an art fair or expo, how do you cram all of these operational considerations into a just a few days of intense activity, and accomplish it without serious incident?Fine Arts Magazine  

The Armory Show (2010): one of NYC's biggest art fairs, with dozens held in the city each year.

 That is the task that art fair managers aim to achieve. It has long been said, usually when journalists are within ear shot, that art fairs are temporary museums; the only difference is the art is for sale. But the often elegant façade betrays a huge undertaking. Logistically, this is a monumentally complex machine to assemble—sometimes years in the planning and just a week or two in the execution. Events like this would not be realistically achievable without the liberal application of insurance to grease the cogs. And this strategy stretches far beyond insuring the art on the walls at the show.  

“The most important thing in both personal and business life is peace of mind – insurance is part of achieving that.” That’s from Paul Morris, president and co-founder of the Armory Show. He definitely recognizes the importance of insurance to art fairs. In order to achieve that ‘peace of mind’ a fair needs to protect itself and its exhibitors from potential financial losses. According to Morris, Pier 94 in New York City (the expanded home of the historically-significant, annual Armory Show event) is undergoing a significant renovation, courtesy of MMPI (the fair’s parent company).  

As a rule of thumb, here are just three important considerations for art fair organizers:  

Venice Biennale (2009), Elmgreen & Dragset, curators/artists. 'Body' floats in a pool outside a house being 'sold.' Photo: Todd Hesler, The New York Times

 1. Workers Compensation Insurance: Required of staff for maintenance and building of all the booths at a fair venue. Add to this any and all employees working for the fair organizers, the exhibitors, and fine art shippers. This may represent hundreds of policies that each party involved must have to employ personnel. Without this coverage, the booths would never be built, the fair organizers and galleries would have no staff and the art would never ship. All of which adds a level of expense and difficulty to holding even a modest event. The insurance is there to protect both the employer and the employee–creating a protected environment for business to be conducted.  

2. Commercial Liability Insurance: For the fair venue, itself, its organizers, gallery participants and shippers, in the event an accident occurs. Without this insurance, exposure to financial losses due to accident or injury can quickly become extreme, in the face of an unexpected event. And the unexpected can occur, sometimes with fatal results.  

Maurice Agis, artist, 77, following his arrest on manslaughter charges on 2006

 Though not installed as an art fair, per se, the British artist Maurice Agis, created a public art event in 2006, when he erected a temporary, onsite immersive art work, Dreamspace, in a park outside a small town in North England. The acre-sized inflatable sculpture was designed as a series of huge intersecting, colored bubbles, inviting the public to walk through as they experienced the multi-sensory world of lights and colors of the artist’s creation. On one particular day, with a few people inside the structure, the wind outside picked up, breaking the moorings, and lifting the structure into the air. As it came crashing back down, coming to rest against a large pole, two women were killed and several were injured. Agis had no insurance. He was taken to court on manslaughter charges (a verdict on which the jury could not agree) and was fined $15,000. This fine was later reduced to $4,000 to better reflect his minimal income of $180 per week, from a state pension. He died in October 2009, at the age of 77, with the debt still standing. If this had occurred in the US, at a major art fair, the damages sought would have been exponentially higher. (left) Sequence of events as Dreamscape takes to the air.  

3. Event Insurance: Designed to protect the operators if the whole event is canceled, due to weather or some unforeseen circumstances. Seem unlikely? In 2008, the Summer Arts Fair in Omaha was completely flattened by very high winds. While not a major fair, it underscores the need to protect against unforeseen or even far-reaching natural occurrences. The organizing company, as well as a number of other parties, stood to be significantly out-of-pocket if they were not adequately covered. Event Insurance goes a long way in protecting the financial investment involved. Having to cancel an art fair or expo in the late stages can be more than enough to sink a great company. It can be doubly-hard when the event has brand recognition that may have taken years to build.  

Taking on the task of organizing and mounting a large art fair is multi-faceted and involves assuming responsibility for scores of people who may be involved. All of this before we even start to think about the juggling act needed to make exhibitors happy or the steps needed to protect the art itself!  

Claude Monet, Fishing Boats at Sea (1868). Alfred A. Pope Collection, Hill-Stead Museum, Farmington, CT

 In this complex mix of people, business interests and product, the art represents, far and away, the single largest financial exposure. Christiane Fischer, President and CEO of AXA Art Insurance in North America, says that at any major international art fair, “AXA Art insures anywhere between $100 million and $1 billion+ in art”. That is a pretty incredible number for a single, large event. Combine that with the exhibitors insured with other companies and you start to see a sweat-inducing number. The whole of The European Fine Arts Fair (TEFAF), widely recognized as the largest fair in the world, has approximately $4 billion in art on display each year.  

The Windsor Hotel fire, NYC (1899). Note the Monet painting, pictured above, being rescued from Mr. Pope's hotel room window by fire depart. Photo: Archives, Hill-Stead Museum, Farmington, CT

 In addition to the art work that will be on display, there is another key component for any event: shipping and handling. This is a massive undertaking. Transporting multiple billions in art at any one time is enough to cause a cardiac event. In order for the shippers to be able to conduct business, they need significant insurance policies in place to protect themselves from potential losses and lawsuits. Even the most cautious shippers, unfortunately, suffer losses at some point. In fact, shipping is the most common cause of art insurance claims. This is such a huge topic and I don’t want to digress so I will be dedicating an entire article to it in the near future.  

There you have it; everybody and every company involved needs the proper insurance in place for a market to trade. Often I get the impression some would rather do without all of this insurance. I have heard it said, “Insurance gets in the way of doing business. Why can’t we all just forge ahead without it? It costs money. It delays progress. It’s… simply put…annoying.”  

Those of you who have been reading these articles know that this notion is counter-intuitive. As my last article explained, insurance allows us to conduct business while transferring the large majority of risk to a third party. Indeed it allows us to take on larger financial risks than we would otherwise be able to assume. Rather than getting in the way of business, insurance facilitates it. It provides a safe environment in which to conduct serious business.  

What is serious business?… $4 billion art fairs are serious business.  

by Thomas Galbraith, Contributing Writer  

  

Contact Thomas at tgalbraith@gendelman.com  if you have any questions you would like me to address in the coming articles.  

Thomas Galbraith is Director of Fine Art for Bruce Gendelman Insurance Services. Galbraith has years of expertise in the art insurance marketplace. He previously worked as an art historian at the Art Loss Register, assisting in the recovery of stolen art, and as a collections specialist at Chartis Private Client Group. He most recently served as fine art expert for AXA Art Insurance in the U.S. and as part of the team that spearheaded the company’s Canadian operations.

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