A New York based company is offering what they believe is the world’s first title insurance policy for fine art.
The single premium, indefinite term policy protects the buyer of a work of art of uncertain provenance in the event of an ownership dispute.
Art Title Protection Insurance – designed to insure the chain of good title rather than against theft, damage or questions of authenticity – is similar to the title insurance policies that have been common in the United States real estate market for a century.
Six years in development, the policy is the brainchild of Larry Shindell, an attorney who co-founded ARIS Title Insurance Corporation six years ago with his sister, Judith Pearson, a former insurance executive.
Lloyd’s of London syndicate Hiscox are supporters of the product. They believe that ultimately title insurance for pictures with “risk characteristics” could become a standard feature of ownership transfer in the art world, and have agreed to serve as re-insurers.
Launched against a backdrop of restitution claims, the policy providers say much of the interest in a ground-breaking policy has come from museums, collectors and dealers who have acquired art in good faith but lack proof of a cast iron provenance in Europe from 1938-48.
Should the owner wish to sell, a gallery or auctioneer will be able to offer the painting for sale with insured title with ARIS promising to refund the insured value and pay legal costs should the heirs of a former owner make a claim to the picture.
The price for such a service will be based upon a work’s history and its value. Prospective clients are expected to provide provenance information they have gathered and the company will do further research – for example checking against databases of lost, looted or stolen artworks – to assess the probability of title challenges.
However company president Judith L. Pearson said a $1m painting with undocumented Nazi-era provenance would be assessed at a rate of 5% of the value, or $50,000, a one-time premium that would last as long as the owner kept the work. A higher-valued work with a more secure title might cost less to insure.
While the policy has been designed to cover transactions closing in the USA, she says it will not be without relevance to the European art trade that has many American customers. Fine art sold at fairs in the USA and paintings or sculpture sent for exhibition in the USA would qualify for title insurance. During the research stage, members of the art trade also expressed an interest in the policy as a potentially useful tool in unlocking inventory that might typically be difficult to sell because of a broken provenance.
Judith Pearson also believed title insurance was relevant as a risk management tool at the top level of the auction market where consignment deals and sale guarantees were increasingly complex. She also cited the case of Berry-Hill, the New York dealers who recently filed for bankruptcy amidst a barrage of lawsuits related to pictures sold on consignment. Here a series of title issues have arisen that might require insurance.
“Just as title insurance brought significant efficiency, liquidity and asset value to the real estate industry, so it could for the art market,” said Larry Shindell, chairman and chief executive officer of ARIS. However, while there have been enquiries and an application, as yet the company has still to sign a client to the policy.
For more information visit www.aris-corporation.com
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