How to Avoid Denials or Low Payouts on Your Fine Arts Claim

Disaster has struck. Have you minimized your risk of having your claim denied or reduced?

As a responsible art collector, you buy fine arts insurance coverage to protect your investment. Yet having insurance and getting a claim approved are two separate issues.

Insurance is there to cover the unexpected. You don’t need to wait for the unexpected to take steps that will ease the claims process. Some of the most significant actions that impact coverage occur before catastrophe strikes.

Make smart choices about your paperwork

Your starting point is having all the expected documentation. Needed documents include proof of ownership, bill of sale, provenance, certificate of authenticity, appraisal reports, and photos. All of these can be digitized and easily accessible in an art collection management system like Artwork Archive.

Mishandling or mismanaging your paperwork can result in a claim denial or low payout.

Here are common paperwork mistakes that can impact your claims process.

Avoid not having an insurance appraisal report or not having one done at the right times.  

Appraisal criteria vary with the type of appraisal being done. Insurance companies will need a report that specifies the piece’s replacement value. You should have an insurance appraisal report done when the work was acquired.

Valia Garzon, Latin American and Contemporary art appraiser and ISA member, recommends updating insurance appraisals for high value works every three to five years. She notes, “Once you have the damage, it’s impossible for the appraiser to know the pre-damage condition.” 

Without reliable information on the pre-damage replacement value of the work, your payout to recover the work’s lost value may be low.

Avoid not properly storing your documentation.  

According to Adrienne Reid, vice president of fine arts insurance at Huntington T. Block, fire and water claims are the most expensive because they cause the most extensive damage. The fire or water disaster that damaged or destroyed your artwork may also destroy your documentation. Reid says,

“We get calls from people that have boxes of papers and that’s their documentation, which is great. But if there’s a fire or something like that, they might lose that box of papers with the fire. So it’s important that they have documentation stored off-site or in the cloud.”

It’s worth the time to scan and upload your paper files into a cloud-based system like Artwork Archive. That way you can rest easy knowing that all of your documentation, and thus the value of your collection, is safe and secure.

Avoid not filing your paperwork in time.

Every insurer has its own claims process, but they all have deadlines. Not filing the necessary paperwork on time can result in a claim denial. Having all your paperwork organized and easily accessible will facilitate a timely filing. You can produce an inventory report with insurance values within seconds with a cloud-based art inventory management system. 

Do you know your insurer’s claims filing process and requirements? If not, talk to your agent for clarification before you need to file a claim.

Shipping mistakes that can limit your coverage

While fire and water damage result in the highest claims, Reid explains that the most common fine arts insurance claims are for damage that occurs while the piece is in transit.

The first mistake an art collector can make is not using a fine arts shipper. Reid says,

“If you look at our book of transit losses, the majority of them are coming  from the U.S. Post Office, UPS, and FedEx, because the art world moves quickly and these shippers get things there quickly, but with that comes the risk of extreme amounts of handling resulting in consequential damage. Art shippers take longer and are more expensive, but you are assured a level of handling that is greater than any other type of transit.”

Another common mistake is assuming your insurance covers your art while in transit. Most fine arts insurance policies cover the work while in transit although there may be territorial limitations. You can get global door-to-door coverage, but don’t assume your policy has it unless you requested it. 

If you’re relying on coverage from your homeowner’s policy, it may not cover transit or off-site storage at all. The default coverage provided by the shippers is low and based on the weight of the cargo. It won’t account at all for the artwork’s value. Shippers offer enhanced coverage for handling high-value items, but this coverage will generally be quite expensive.

Stay proactive about protecting your art collection

Having fine arts insurance coverage is only one piece of the puzzle. If you want to be confident that your insurer will be there for you when bad things happen, stay proactive about protecting your collection beyond having a policy. There are no guarantees – that’s why you have insurance – but you can hedge your bets.