WTC Fine Art Losses Undervalued

Although it is estimated that more than $100 million in fine art was destroyed in the terrorist attacks on the World Trade Center on Sept. 11, 2001, a majority of the art was underinsured, according to insurance industry art experts.

Christiane Fischer, chief executive officer of AXA Art Insurance Corporation in New York, which insured a number of organizations that lost art collections in the attacks on the WTC, said AXA paid out $15 million after 9/11.

She said its quite possible that the payout by the insurance industry was lower than the actual value of the art lost as a result of the attacks. “Usually, corporate collections are not insured to full value, because nobody ever anticipates a total loss,” she said.

AXA insured Cantor Fitzgerald's collection and Larry Silverstein's collection of public art on display at the World Trade Center, according to Ms. Fischler.

Public art included “Sphere” by Fritz Koenig, valued at $1 million; “Red Stabile” by Alexander Calder, valued at $1.5 million; “World Trade Center Tapestry” by surrealist artist Joan Miro, valued at $2 million; and “World Trade Center Plaza Sculpture” by Masayuki Nagare, valued at $1 million, Ms. Fischer said.

One example of an undervalued collection that was destroyed in the attacks belonged to Thacher Proffitt & Wood, a New York law firm formerly housed in the World Trade Center. The collection, which consisted of more than 200 pieces including original maritime prints and large portraits, was recently replaced, said Joseph G. Grasso, a partner of the firm.

“There was a lot of artwork, not a major collection or major works of art, but things the firm had accumulated over more than 100 years,” Mr. Grasso said. “The collection included four or five portraits of the founding partners and old maritime prints, which were more historic than anything else.”

Most of the law firm's collection hung in its 100,000 square feet of office space at Tower Two of the World Trade Center. The rest of the collection was in storage, also in the World Trade Center, he said.

“We have now about completed massing and reinstalling [replacements for] what we lost,” he noted. “We have purchased old maritime prints and new contemporary paintings and photographs.”

Thacher Proffitt & Wood hired an art consultant to locate prospective artwork for the firm. Mr. Grasso said he and other members of an art committee previewed art work at a “large number of galleries.” An antique ship model on display in the firm's reception area was recently replaced with another model purchased at an auction at Christy's, he said.

The firm, he noted, had photographs of the large oil portraits and looked into having an artist recreate them. The cost of replacing them, however at $5,000-$10,000 each was prohibitive.

Although the firm had good insurance coverage and “wonderful treatment by [its] underwriter,” he explained that the art collection was “one area where we were probably undervalued, just because it had been with us for so long and much of it was historical.”

Mr. Grasso said the firm had an inland marine fine art rider to its overall property policy, which had a blanket limit of $100,000 for art. He estimated the arts worth to be double that amount. One painting alone, a “nice oil painting that was a contemporary still life,” cost $10,000-$15,000, he said.

“We've replaced almost all of it,” he said. “We still need to buy a few pieces and we're looking for works. But the reception and conference room areas are filled.”

Since the loss, he said the firm has learned a lesson. “Now we know exactly what we spent on the new pieces and that will be the number on our current policy,” he said. The pieces in the new fine art collection are insured for the replacement costs, which would run between $300,000 and $500,000, Mr. Grasso added.

Dorit D. Straus, vice president, worldwide specialty fine art manager for Chubb and a member of the Committee for Arts and Records with the Inland Marine Underwriters Association, said many organizations buy art, frame it, hang it and forget about it.

She said although values of art change, those who buy art often simply insure it for the purchase amount rather than the replacement amount.

She explained that buying a work of art at an auction is like buying it wholesale. If the painting were to be damaged, lost or stolen, it may not be available at auction again. In this case, it would need to be purchased from a dealer, most likely at a greater cost.

“People need to review their values from the point of view of an insurance replacement cost rather than the fair market value,” she said. “The work also needs to be appraised by an insurer who understands the nature of the collection and its marketplace.”

She said risk managers and owners of art collections should review their schedule every three to five years.

She recommended that risk managers who are not art experts should confer with the broker or the insurer on how often the collection should be re-appraised.

Risk managers should make sure they have an up-to-date inventory of all artwork with a listing of the artist, a description of the work, the size of the work and its location.

She added that often partners of a firm, for example, bring pieces of a private collection to the office. These pieces need to be differentiated from the office collection, she said.

Organizations also need to include art collections in their contingency plans, she said, which would include a site for storage. Someone in the office needs to be in charge of keeping an inventory of the work and making sure cleaning crews either know how to maintain the work or that they know to leave it alone.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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WTC Fine Art Losses Undervalued

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