Perils

Deductible

Options

Introduction

One of the more difficult things to determine is what exactly is a fine art. Do an insured's baseball cards, while valuable, constitute a fine art, or are they simply a valuable collectible? Fine arts are generally considered to be privately owned collections of high-value items such as paintings, etchings, pictures, tapestries, rare glass, small ornamental items, antiques, art glass, and other genuine works of art. Collectibles tend to be items that are somewhat rare and appeal to a large audience. Collectibles are often mass-produced items with a limited number of items still available, such as baseball cards or comic books. Mass-produced items that are simply old may not have the value an insured thinks. Shows like Antiques Roadshow and Pawn Stars often show that what someone thinks has value doesn't, and also discover rare items with exceptional value. When in doubt, having the item professionally appraised can determine its actual value, as well as let the insured know whether it needs to be given broader coverage than is available on the homeowners policy. If an item turns out to be a true fine art or a collectible with exceptional value, the insurer is likely to require an appraisal to help establish the value in order to properly insure the item.

The form allows blanket coverage for unscheduled property and coverage for scheduled property as well. Optional Breakage of Fragile Articles Coverage is an option, and such items must be listed on the schedule.

Property Covered

A. Property Covered

We cover the property insured under this policy that is owned by an "insured" while it is anywhere in the world.

1. Scheduled And Unscheduled Fine Arts

a. We cover scheduled and unscheduled articles of fine art owned by an "insured" only if:

(1) An amount of insurance and premium is shown for that property in the Schedule above.

The amount of insurance shown for such property is limited by Paragraph D.1. Loss Settlement in Common Policy Provisions Form PM 00 01;

(2) They are located at the address(es) shown in the Declarations; and

(3) You agree that if they are to be transported from such location, they will be

packed and unpacked by competent packers.

b. This class includes private collections of:

(1) Drawings, etchings, lithographs, paintings, pictures, tapestries;

(2) Art glass windows;

(3) Bona fide works of art such as:

(a) Valuable rugs;

(b) Statuary, marbles and bronzes;

(c) Antique furniture and silver;

(d) Manuscripts and rare books; and

(e) Porcelains, rare glass and bric-a-brac;

and

(4) Other bona fide works of rarity, historical value or artistic merit.

Analysis

Like most personal property coverages, this form covers scheduled property while it is anywhere in the world as long as it is shown on the schedule. The schedule requires an address to be provided for the items scheduled; a primary, secondary, and other location address must be provided. The insured can travel with his fine arts, or loan them to exhibits, and the coverage follows as long as those locations are listed on the schedule. If the insured takes certain objects to a winter or summer home, those locations must be listed.

While the property is covered anywhere in the world, the form states that the property must be at the address shown in the declarations and that if the property is to be transported to another location, that it is to be packed and unpacked by competent packers. Many items of fine arts are fragile and need to be handled in a special way, especially if the object in question is large.

The loss settlement conditions that apply appear in the Common Policy Provisions, PM 00 01, section D.1. The Fine Arts Form has no settlement provisions; it is designed to identify specific property and what the agreed amounts are, and the form is to be paired with the common policy provisions form.

D. Loss Conditions

Loss Settlement

a. Standard Loss Settlement

(1) Scheduled Property

The value of each scheduled article or item without a double asterisk (**) designation noted in the Schedule is not agreed upon but will be determined at the time of loss.

We will not pay more than the least of the following amounts:

(a) The actual cash value of the article or item at the time of loss;

(b) The amount for which the article or item could reasonably be expected to be repaired to its condition immediately prior to loss;

(c) The amount for which the article or item could reasonably be expected to be replaced with one substantially identical to it; or

(d) The amount of insurance.

Analysis

Section D.1 of the Common Policy Provisions form states that the value scheduled is not an agreed upon amount, but that the value will be determined at the time of loss. Certain items may be identified with a double asterisk, which means that the provision D.1.b. Agreed Value Loss Settlement applies to those items, and that value will be determined at the time of loss.

In event of a loss, no more than the lesser of four amounts will be paid: the actual cash value of the article at the time of loss, the amount for which the article could be reasonably repaired to its condition immediately before the loss, the lesser of the amount for which the article could be reasonably replaced with one substantially identical to it, or the agreed value of the item. This allows the insurer to return the insured to his pre-loss condition at the lowest cost to the carrier but still providing proper indemnity. It is important to make this clear to the insured; just because artwork is scheduled with an assigned dollar value does not mean that is what the insured will get in the event the artwork or part of the artwork is damaged or lost. The price of fine arts fluctuates with the market, and a work may have depreciated since it was added to the form.

The location of the property must also be listed on the declarations; if property is to be exhibited, the carrier needs to be aware so it can be sure proper loss control measures are in force. Property that is to be moved from an insured location must be packed and unpacked by competent packers. Various types of art need to be packaged with certain materials and transported with great care. Some items may need to be kept at a particular humidity level in order to prevent damage; others may need a particular type of packing material so as not to scratch the artwork.

The form highlights types of items considered to be artwork; the list is self-explanatory and is not limited. Other works of rarity, historical interest, or artistic merit are covered even if they are not listed.

Newly Acquired Fine Art

2.Newly Acquired Fine Art

We cover newly acquired articles of fine art subject to the following conditions:

a. The limit for this coverage is 25% of the total amount of insurance for scheduled fine arts; and

b. You agree to report to us any newly acquired articles within 90 days of when you acquire them and pay an additional premium from that date.

If you fail to do so, coverage will cease automatically 90 days after you acquired the property or at the end of the policy period, whichever occurs first.

Analysis

There are special conditions for when an insured acquires new fine arts. Since the value of fine arts varies, coverage for newly acquired items is limited to a maximum of 25 percent of the total scheduled amount. The insured is to report the acquisition within ninety days and pay any additional premium. If the insured fails to advise the carrier of a newly purchased item within the ninety days, there is no coverage beyond the shortest of ninety days or the end of the policy period. Since fine arts tend to have such high values, the carrier wants to be sure it is collecting adequate premium for the exposures it is insuring.

Property Not Covered

We do not cover articles of fine art:

1.That are contraband or in the course of illegal transportation or trade;

2.In the custody of a dealer, art gallery, art institution, auction house or room or museum open to the public when insured in the name of such entities;

3.Exhibited at fair grounds or on the premises of national or international expositions unless the premises are covered by this policy; or

4.Owned by and insured for account of Federal, State, County or Municipal authorities.

Analysis

As always, contraband or property in the course of illegal transportation or trade is not covered. Fine arts that are considered cultural treasures may be smuggled out of countries without the government's knowledge; these items are then contraband. There are collectors who will pay for smuggled artifacts.

Items that are placed at a gallery on consignment or are shown in a museum or other gallery, are not covered if the dealership or gallery has insured the artwork in its own name. This form applies only when an individual owns the item, and the item is not owned by governmental authorities; again, the item is usually insured under the name of the governing entity, and this form would be duplicate coverage.

Perils

C. Perils Insured Against

We insure against risk of direct physical loss to covered property.

We do not insure:

1. Loss caused by wear and tear, deterioration, inherent vice or any quality in property that causes it to damage or destroy itself;

2. Loss caused by insects or vermin;

3. Loss caused by any repairing, restoration or retouching process; and

4. Breakage of art glass windows, glassware, statuary, marble, bric-a-brac, porcelains and similar fragile articles.

We do insure breakage caused by:

a. Fire or lightning;

b. Explosion, aircraft or collision;

c. Windstorm, earthquake or flood;

d. Malicious damage or theft; or

e. Derailment or overturn of a conveyance;

Analysis

This is an open perils form, so only what is specifically excluded is not covered. Broad coverage is provided; wear and tear, deterioration, or inherent vice is excluded, as is damage by insects or vermin. Wear and tear are expected to happen over time, and any valuable property should be protected from insects or vermin.

Specific to fine arts is the exclusion of loss caused by restoration, repair, or retouching. Works of artistic value are often delicate and can be significantly damaged or ruined by a bad repair; so, such damage is excluded, as the repairer in question should cover the loss caused by his work.

Glass is obviously fragile, so breakage of art glass windows, glassware, statuary, marble, bric-a-brac, porcelains, and other fragile items is excluded except for certain named perils. Those covered named perils are fire or lighting, explosion, aircraft, collision, windstorm, earthquake, flood, malicious damage, theft, or derailment or overturn of a conveyance. These are mostly natural phenomena and are things the insured cannot prevent. Someone bumping into and knocking over a marble statue is excluded, but damage from earthquake is not.

Deductible

D. Deductible

We will pay only that part of the total of all loss payable under this policy that exceeds the deductible amount shown in the Declarations.

Analysis

The form has a standard deductible clause. A loss is not paid until the amount of the loss exceeds the amount of the deductible listed on the policy.

Options

E. Options

One or more of the following options apply to this policy only if the box for that option is checked in the policy Declarations, or is otherwise indicated elsewhere in this policy.

1. Breakage Of Fragile Articles Coverage

The preclusion of coverage under Perils Insured Against in Paragraph C.4. above does not apply to articles described and marked with a dagger symbol (†) in the Schedule.

2. Windstorm, Hurricane Or Tornado Exclusion

We do not insure for loss caused directly or indirectly by windstorm, hurricane or tornado to covered property at the location declared in the Declarations or elsewhere in this policy for this option.

Analysis

The form provides some unique options. The first is to remove the breakage exclusion and provide breakage for specified items. The insured pays additional premium for such items since generally what is insured is readily breakable, but it allows the insured to insure particularly valuable or treasured breakables.

The option exists to exclude coverage for windstorm, hurricane, or tornado at the insured or other specified locations. This may be applicable when the insured is in an area not susceptible to such hazards or has taken special precautions to prevent damage from such acts of nature. In such instances, the insured should receive a premium discount for removing the hazards from the policy.

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