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July 26, 2019

Art Fraud and Risk Management

Summary:

If you have provided insurance services to the art community for long enough, you will receive a “Friday phone call.” Be careful.

Photo Courtesy of Pixabay

We are all aware of numerous, infamous attempts to defraud galleries with forged paintings. We attend conferences and pay attention to this sort of a story because it is remarkable to think that anyone could trust, and breach trust, to that magnitude. Sadly, it happens every day.

Every day, there is a crate of an artwork that is sold and not reviewed for condition first. Every day, there is reliance on condition of an artwork by review of the crate alone. Every day, there is a consignment that takes place without written confirmation and transparency. This is the nature of the beast.

See also: The Globalization of Risk Management  

If you have provided insurance services to the art community for a long enough time, you will receive what is loosely referred to as a “Friday phone call.” These are the time-pressured, high-valued, too-good-to-be-true risks that absolutely, positively have to be placed by the end of the week. This is a more practical example of something that an insurance broker should be aware of as something that can affect their day-to-day life. For example, who could forget the Caravaggio in the crate that could not move until it was insured? Or the ever popular Michelangelo that came with tons of gold star stickers on the non-USPAP-compliant appraisal.

With every incoming risk, regardless of demanding time constraints, there is the need to review provided information and follow a process. It is important for brokers to take their time to examine the integrity of the information to uncover anything suspect in the submission. Some guidelines to consider when it comes to risk and art fraud related to fine art insurance submissions, include:

  • Respond logically and practically in an unemotional manner to “pressure placements”
  • Require proof that the artwork exists
  • Require proof that the artwork is authentic
  • Require proof of the value of the artwork from a credible source
  • Follow required compliance rules related to disclosure of the named insured
  • Review the credentials of the experts involved in the process as well as the credibility of the parties insured

See also: Natural Disasters and Risk Management  

Do not be dazzled or blinded by the majesty of the incoming opportunity. Our role as professionals is to pre-qualify risks for the underwriting insurance company partners with which we work. Our role as brokers is to represent the interests of an insured, and the careful selection of those parties is integral to the success of your firm.

This article is provided for general informational purposes only and is not intended to provide individualized business, risk management or legal advice

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About the Author

Anne Rappa has more than 23 years’ experience in the fine art insurance field in representing large and complex museum, commercial and private and corporate collection risks. She has both specialty fine art insurance as well as a general insurance background.

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