One of our contents specialists recently providedassistance with the valuation of a Cibachrome photographic print.Cibachrome is an older, non-digital photo print process. Productioninvolves a slide negative and special photo paper, resultingin some of the most beautiful color prints in all of artphotography.

As background, many elite photographers work in very smalleditions. Andreas Gursky, for example, often produces editions ofsix prints; Cindy Sherman has been known to produce ten in anedition. The Visual Artist's Rights Act (VARA), which protectsartists' rights in the United States, only considers editions of200 or fewer to be worthy of legal protection.

In this particular case, a policyholder owned a large-scaleCibachrome, or “C-print,” by a photographer who createsdramatic color landscapes. As much as I admire many of thephotographer's images, which are truly spectacular, I am also inawe of his business model. He sells his photography in the swankgalleries he owns. All of these galleries are located in glitzylocations, such as Las Vegas, Hawaii, New York City, Miami,and Aspen—to name but a few. By selling hisphotography exclusively through these galleries, he retainsabsolute control over the retail pricing of his art photography.All of the sales personnel are also the photographer/owner'semployees, meaning that he ultimately controls the manner inwhich sales approaches prospective buyers and leveragesvarious sizes and editions of the same prints to control the valueof the prints.

It is not uncommon for this particular photographer to produceeditions of nearly 1,000 prints in just one of the several sizes inwhich one of his images may be available. Combining all of thevarious editions in numerous sizes can result in many, manyprints being available of a specific image.

A case involving one of his damaged prints reminded me ofthe delicate balance between the roles of underwriting andclaims. Underwriting's role is to weigh risk andthen issue policies accordingly, preferrably when elements arefavorable. Underwriting determines which policies will bewritten, while claims manages the consequences. The claimsdepartment handles losses that occur based on the terms andconditions of the policy in force.

In this instance, the insured's print was part of an edition ofthe largest size available, which totaled 200 prints. These weresold framed for approximately $15,000. In addition to this standardedition, there is also an “artist proof” edition of 20 in thissize, priced substantially higher, in the mid $30,000 range. Tocomplicate matters, there are additional editions in various,smaller-sized formats of this same image.

When this policyholder approached the gallery for a “current”replacement value in order to schedule his photograph with hisinsurance carrier, he was in for a surprise. Staff informedhim that prints like his—from the edition of 200—were completelysold out, except for print 1/200. The photographer makes it apractice to retain print #1 of all of his images. The galleryindicated print #1 was available for just over $230,000. Theunderwriter accepted this letter and scheduled the insured'sphotograph for nearly a quarter of a million dollars.

Now think about it. With 200 prints, at an initial cost ofapproximately $15,000 each, the entire edition sells for $3million. If each of the 200 print owners each secured coveragebased on the gallery's asking price of print #1, the “value” ofthis 200 print edition balloons to $47.5 million.

What Happened Next

The insured's print fell off the wall and incurred damage.The artist's gallery would not assist with a repair oragree to produce a replacement print, stating that doing so wouldbe contrary to the photographer's guarantee to collectors of hisworks.

Our contents consultant found the artist's gallery still had oneof the 20 “artist proofs” of this image, a more costly printcompared to the insured's damaged print, but nevertheless availablefor $33,000. Despite the methodical research, underwriting hadissued an “agreed value” policy, which required that claimsessentially write a check for $230,000+ and “call it a day.”

Would the outcome have been different, were a “stated value”policy in place? With a “stated value” policy, the valueis not agreed when writing coverage. Rather, valueis determined at the time of the loss. Had such coveragebeen extended to the insured's artwork in this case, I suspect thecorrect number would have been around $15,000.

So what is the moral of this case? Always know exactly uponwhat you are agreeing.