Fine Art and the Insurance Industry

The insurance industry has long been placed in a quandary when faced with coverage of fine art objects. Typically objects are insured for values greater than the actual replacement cost and in the event of a loss, it becomes a problem for the carrier to determine the actual loss and make an appropriate settlement to the client.
    The fundamental problem for insurance carrier has been determining the authenticity of the individual work. The work of living artists has not presented a problem as it was always possible for the painting to be presented to the artist to determine its authenticity. However, with the works of artists who are deceased, identification of authenticity became a problem that compounded with the age of the painting. Even with artists who were well established and died well into this century, the determination of authenticity became a major problem.
    The art world is rife with misattributed works and forgeries. This situation was allowed to exist as there was not a method of determining authenticity other than through the subjective opinions of so called experts. These experts often had back door arrangements with galleries who sold works that they authenticated. In some cases, the experts was in fact a gallery owner who everything to gain by providing the expertise. Further compounding the problems was the disclaimers placed in the expertise couched in such words as "in my opinion" or "the painting will be included in the catalogue" or other non-declaratory statements. This common practice allowed reached scandalous proportions and brought the art world to a situation where it has become extremely dangerous for insurance carriers who are open to an emerging industry of insurance fraud and the ever present problem of over-insurance. The risk of a financial loss is dramatically increased with a fake or misattributed painting. The problems that emerge vary with differing jurisdictions.
    Fortunately this problem has reached its peak and is now diminishing with the advent of new technologies such as those pioneered by Veritus Ltd.. Of prime importance to any insurance carrier is the authenticity. The owner may be a valued client and his or her painting might be magnificent, but if it is a fake, it is becomes a major problem for the insurance carrier in the event of a loss.
    Authenticity is a simple matter with contemporary artists. It is only necessary to ask the artist. However after the death of an artist, there is often a rush of fakes to the market. Unfortunately, the friends and family sometimes produce these fakes. This can make their detection difficult, as the friends and family often provide evidence or are the source of determining authenticity. A good example is Amedeo Modigliani, whose friends both finished some of his unfinished paintings and painted numerous additional works after his death. These works entered the market, and some still circulate today as originals. This scam is not unique to this century; it is well documented that copies and student works were being passed as originals in the fifteenth century.
    Once enough time has passed, the originality of many paintings becomes obscured by the mists of time. This is such a problem with Old Master paintings that the major auction houses would rather place a disclaimer on the sale than take the steps to insure authenticity. Look at any recent auction catalogue containing an Old Master Painting. There appears a disclaimer that the buyer will purchase this painting at his or her own risk. Why do the merchants conduct business this way, when there are means to determine with 100% accuracy the true attribution? Perhaps it is because if a merchant can sell a student work as an original with a disclaimer; the profit potential is much greater. Were the merchant to discover through digital verification that the paintings was a student work or copy and have to sell the painting as such, the profit would be much less. This is unfortunately a factor in modern business ethics.
    To be 100% sure of the authenticity is imperative for any insurance carrier. To insure any such work without being confident of the authenticity is foolish. Unfortunately, it has been noted that fraudulent paintings and misattributed paintings seem to have a much higher claim ratio in the insurance industry. The problem is that when the owner discovers that his highly prized painting is a copy, he is faced with a dilemma. Should he attempt confront the seller if possible. The risk is high as his chance of a recover is usually limited so invariably he will attempt to sell the problem on to the next victim. Sometimes the work becomes known and the resale becomes impossible. However, with all loss insurance all it takes is a theft or a small fire and the problem is solved for the owner. However, the problem has just begun for the insurance carrier. Herein lies the importance of digital verification. It is the only secure and scientifically sound method of determining the authenticity for Old Master paintings.
    A large number of paintings are in circulation as original works that are actually studio and student copies. Many of these works have expertise from top experts, both living and dead. What will be the situation for the insurance carrier in the event of a loss if it can not be determined that the painting is a studio work or a copy? The potential for loss is dramatic.
    It is thus imperative for the insurance carrier to guarantee the authenticity of any work being insured. The only sure way that this can be accomplished is through the use of digital verification similar to that used by Veritus Ltd.. At the writing of this information section, Veritus Ltd. was the only Digital Verification Company that provides a financial guarantee of authenticity on works that it verifies.

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it was last modified : 4 June 2018