Property Insurance

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It is important to have an up-to-date valuation of your artwork to ensure you are fully covered in the event of a claim. Factors such as artist, market value, date becomes important when art is valued for art insurance. Ways in which different categories of art is valued for Art insurance:

  • Insured own artwork: Insured own property or artwork is valued based on the value agreed in the Art Insurance policy.
  • Sold item not delivered: Selling price less the fee/commission
  • Purchased item: Cost price plus the fee/commission
  • Property in Care Custody and Control: Market value/ liability, whichever is less

In case of valuing the art of established artists, help comes from their large amount of documented sales, both from the auctions or personal art galleries.

In case where the completed artwork to be sold is damaged/stolen before it is officially sold, it can be valued at its selling price. Your insurance will fetch you the sale price less the pre-determined percentage.

Artwork which is already sold is generally insured for the full sale price. Valuation of work-in-progress artwork is determined by the percentage of the work completed when the artwork was stolen or destroyed on a particular date. Fair market value always plays a major role.

In case of a less established or a young artist, valuation becomes more complicated. Fewer documented sales become the major setback point. In such instance, more depth research and support factors help in final valuations. Relying only on recently sold artwork does not help.

Case 1 on Art valuation for an Art Gallery

Regal Art Gallery in Mumbai was well known for its art exhibitions. It is known for the large crowd that gathers for each auction. This gallery had insured itself with the help of general liability insurance policy provided by an insurance company. The gallery was covered against:

  • Premises liability – It covered for any accidents happening inside the art gallery or on its premises.
  • Products liability – It covered for the products that the gallery sold.
  • Completed Operations

A budding artist showcased his debut exhibition in this gallery. However, the artist claimed that the gallery did not promote the opening enough and thus he suffered financial losses and damages. He filed a legal claim against the art gallery.

The completed operations section of the general liability policy helped in protecting the art gallery.

Few days after, some paintings were stolen from the art gallery. Since the Regal Art Gallery was well known and often carried out auctions of its paintings, it had documented all the auction related documents. Th Art Insurance policy valued the stolen paintings based on the value agreed upon in the policy.

Case Art Valuation for an Individual Artist

Living in Delhi, Soham at 27 years of age was a budding artist of his generation. He had maintained his studio in a building where he regularly displayed his painting. Earlier he had sold some smaller paintings. Now he was working on a bigger picture by making large paintings that he had never painted or sold before.

He was looking forward to selling these paintings at a handsome price. But life had some other plans for him, and one day, when he was out for shopping, all 6 of his paintings were destroyed by fire in his studio.

Soham now claims that each of his large painting was worth rupees 25, 000. So how will the insurance company value the correct price of his paintings?

The destroyed paintings must be worth 25,000 each to Soham, but this does not mean that they are worth the same in the open market. Soham does not have any adequate proof of the fair market value of the paintings before they were destroyed.

Soham would have been right at valuing the painting at 25000 each if:

  • Similar painting was sold by him at the same price before they were destroyed.
  • If Soham or an Appraiser demonstrate that comparable paintings regularly sell for comparable amounts in galleries or through agents or representatives.

In Soham’s case, his paintings will be valued by the appraiser by taking into consideration the facts about the art market and the artist (Soham).

If for example, comparable art by similar artists sells at the local art market for between 10,000 to 15,000 rupees per painting, then these values may be used to value the destroyed art.

Consider another case where Soham’s paintings were merely damaged, but not totally destroyed by the fire. Here the art could be restored to its pre-condition by proper cleaning as it was only smoke damaged. Here the value of the art or the damage claim equals to the value of restoration.

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