September 1998 Volume 21 Number 1

Adjusters, Insurance, Conservation: Quandary, Cogitation, and Resolutions

This article is a summary of an informal slide presentation given at the Annual WAAC Meeting, Timberline Lodge, Mt. Hood, Oregon on October 6, 1998. The opinions and observations made regarding the insurance industry are my own, and are presented to help initiate further discussion and more productive communication between conservators and insurance professionals.

In this paper, I will focus on one topic that has proven on many occasions to be a source of difficulty for conservators: loss of value. I am aware that your Code of Ethics prohibits you from entering into the realm of appraisals as a clear conflict of interest. However, the reality is that the "success" of a conservation treatment of a damaged work of art does have a very real impact on the value of the piece after treatment, and proper communication between insurance representatives and conservators can be critical.

When I was introduced at Timberline as the featured speaker on insurance, I felt an immediate appreciation for how George Armstrong Custer must have felt at the Little Bighorn.

I spoke then and write here as an art historian working within the insurance industry and NOT as a representative of the insurance industry. I am very much aware that many conservators have apprehensions about the insurance industry and have legitimate issues and concerns regarding their direct or indirect involvement in fine art insurance claims or their own insurance coverages.

The perennial question "What is Art?" lingers within the insurance industry. It has been my experience that a vast majority of the people working within the domestic insurance market acknowledge their limited knowledge or appreciation of art. Art appears intimidating and foreign to insurance underwriters, brokers and claims adjusters.

However, there do exist a minority of people within the insurance industry who are atypical and specialize in fine art insurance. This presentation is not about them, but rather addresses a disturbing trend I have experienced which tends to exclude bona-fide art-related expertise and a thorough understanding of the underlying principles of conservation from the claims process.

The U.S. insurance industry has a diminishing and narrow understanding of the art object as well as the important role of the fine art conservator. When an object of art is damaged, the insurance company typically assigns the claim to an adjuster. The adjuster assigned to the claim can either be an "in-house" or company adjuster, or an "independent". By definition, I am an independent insurance adjuster since I am not on the payroll of any specific insurance company.

Independents are typically utilized when a claim requires a specific expertise. A damaged bridge, for example, would require the technical evaluation of a structural engineer to properly assess the damages. I play a similar role within the art community. Within the insurance industry, I am one of the only fine art experts with an academic background that specifically compliments my multi-line training and experience as an adjuster.

My role as an adjuster is to investigate the insurance claim by meeting with all interested parties and making a physical inspection of the work or works of art to assess damages. Adjusters are guided by the insurance policy, which can vary from company to company. Most claims involving fine art involve damage in transit. An underwriter's greatest exposure is not always fire or theft but inferior packing and shipping compounded by human error. If stupidity were to be excluded within an insurance policy, I would be out of a job.

When a work of art is damaged, I immediately secure the services of a trained conservator from an appropriate area of expertise to assist me with the insurance claim. We work in tandem to immediately respond to the situation and stabilize the damaged artwork and open a dialogue between the owner and the artist, if living. We strive to bring the most expertise to the claim as possible and truly try to decide what is best for the object. Most museums and collectors feel a tremendous sense of responsibility to preserve the work of art and respect our direct involvement and approach.

Following conservation, I must make an assessment of any monetary loss of value. This process can be very difficult for conservators and others to fully comprehend, yet is a constantly recurring problem within the insurance industry. This subjective process is more about the appreciating art market and less about conservation. Conservation, in the opinion of the conservator and the fine art adjuster, can be 100% successful yet the insurance policy language allows for an evaluation of the pre-damage and post-damage condition.

During this process, I have seen innumerable so-called "fine art experts" come forward to render an opinion for the sake of the art. In determining loss of value, many people utilize an appraisal scenario, which incorporates a mathematical formula of subjective values pre and post damage. The difference between the two numbers should equal the "correct" loss of value. I have seen way too many loss of value opinions expressed to insurance companies that become "truth" without compromise and litigation commences.

I approach the loss of value process differently yet with a sense of openness and fairness. First, I believe that the quality of the conservation is one of the most important factors. Secondly, the auction market and a history of private sales should be considered, plus the state of the art market at the time of the claim. Most collectors and museums appreciated the diversity of these factors being considered as well as our care and concern that the best conservator, in that specific medium, has been utilized.

A monetary compensation for damage is never a reflection upon the quality of the conservation. I consider the loss of value compensation as a negotiated compromise that should be openly discussed by the fine art adjuster and the owner of the artwork. A conservator should never be placed in a position to render a public opinion regarding loss of value.

Unfortunately, many untrained adjusters "use" the conservator for loss of value and press the conservator for a written success percentage attributed to the anticipated condition or "wholeness" of the work of art after treatment. Therefore, a conservator may innocently write within a Treatment Proposal or Condition Report that "conservation may be 90% successful", thinking they are circumventing the question of loss of value.

The adjuster will lock onto this figure faster than a musky to a surface bait. The conservator has just been dragged into the loss of value battlefield. One way to avoid such a misrepresentation is to clearly state that the success rate of the conservation is by no means a representation of a perceived loss of value. The conservator should clearly state in writing that they do NOT make loss of value assessments. It is my job to make these assessments and you may call me at any time for assistance.

Glossary of Terms:

underwriters - employed by an insurance company to assess or rate a risk, establish a premium for the insurance and issue the insurance policy.

broker - functions as the intermediary between the policy holder (Assured) and the underwriter. Typically assists the Assured with selecting the appropriate insurance company. Agents or brokers sell the policy and collect the insurance premium.

multi-line - an experienced adjuster who traditionally handles both property and casualty claims.

in transit - the transportation of artwork by either truck, airplane or personal conveyance.

musky - a prehistoric bottom-dwelling, lake fish hunted for its elusive nature. Muskies are masters of taking advantage of mistakes.

surface bait - a spinning lure designed to propel on the waterÕs surface so as to provide constant irritation to the musky. "The Cisco Kid" is a common example.