Making Sure Your Art Is Yours

For collectors, buying title insurance can offer peace of mind or a full settlement if it turns out their artwork has a murky past

by Tatyana Gershkovich

On May 8 the champagne was flowing at the Manhattan galleries of Bonham's auction house in anticipation of the upcoming spring sales. The mood was confident, as both buyers and sellers anticipated a successful season. While many of the guests were members of long standing in the close-knit art world, there were also some newcomers, and it's not quite clear how welcome some of them will be.

"Here come the ARIS people!" is how Lawrence Shindell says he and his team were greeted when they arrived. Unlike most of the other attendees, Shindell deals not in art, but in insurance. The former lawyer is chairman and CEO of ARIS Title, which he founded in 2000 with Judith Pearson, his sister, who has an extensive insurance background. Based in Manhattan, ARIS offers a new product called "art title insurance," which is similar in concept to real estate title insurance. Both protect the policyholder against loss in the event of an ownership dispute.

The global art market is flush with cash, having grown by 95% between 2002 and 2006, from $25.3 billion to $54.9 billion, according to a survey by the European Fine Arts Foundation reported in ARTnews magazine. Annual private art sales alone total $25 billion to $30 billion, according to the magazine, and despite global economic insecurity, auction houses continue to set records. A 1976 triptych by Francis Bacon sold on May 14 for $86.3 million and became the most expensive work of modern art ever sold at auction.

Aesthetic Passions vs. Brass Tacks

For buyers, art isn't just about making money. It's a place for investors to have a good time, socialize, and indulge their aesthetic passions. But this rosy atmosphere, says Shindell, can also lead to reckless investing practices, such as the purchase of a work with a questionable title.

"The problem of art title has existed for some time. It was first illustrated in the context of claims of art seized during World War II, and over time as each title dispute presents itself the art market becomes more aware and risk-averse," Shindell says. "This is combined with the increasing complexity of art transactions that involve investment funds, lending against art, people generally regarding art as an asset, and the increasing value of art. Today, the financial risk of transaction is much more acute and much more in need of risk management."

Last year's highly publicized title dispute involving director Steven Spielberg has become a cautionary tale for collectors. In 1989, Spielberg purchased a Norman Rockwell painting, Russian Schoolroom, that, unbeknownst to him, had been stolen from a Missouri gallery 16 years earlier. If Spielberg had had art title insurance, Shindell argues, he would have been able to avoid the whole mess because either his company would have uncovered the painting's origins during due diligence or it would have reimbursed the director the full cost of the painting. Without it, Spielberg was not only out the $700,000 value of the painting but also his legal fees.

The FBI estimates that $6 billion worth of art is stolen each year. But Jane Jacob, a board member of the Appraisers Association of America, a nonprofit organization based in New York, estimates the number to be even higher, somewhere between $7 billion and $9 billion.

Art lovers view Monet's 'Waterlilies' displayed on May 9, 2008 at Christie's in New York. DON EMMERT/AFP/Getty Images

Private and Unseen

"The stolen art industry is second only to gun trafficking and drug-running. They say it's tied into that, and I believe that's exactly true," says Jacob, who is also president of Jacob Fine Art, an art appraisal and advisory firm in Chicago. She added that because the majority of art sales are private, many stolen artworks disappear for years and reappear only when they enter the public sphere as part of an auction, exhibition, or publication.

For years the best defense for a buyer was hiring experts to trace a work's history, but it was often just as easy to forge a provenance as it was a painting.

Moreover, finding reliable papers for older works or works seized by the Nazis, for example, was almost impossible.

Jacob looked into the possibility of art title insurance in the 1980s, when issues of provenance in art became topical because of emerging claims on art seized in the Holocaust. At the time, Jacob dismissed the idea. "It didn't have any teeth in terms of financial backing. It was conversational, but there was no entity to take it on," she says. She has since changed her mind, realizing during the past two decades that there is a need for an art title registry. "Fifteen years ago, provenance or chain of ownerships wasn't on anybody's radar, but now it's on everybody's tongue," she says.

Financial backing was not the only obstacle to attracting clients. For example, Hiscox, a syndicate of Lloyd's of London, sells art title insurance policies, but its annual renewal model didn't appeal to customers in the U.S.

A One-Time Premium

"Customers worried that if someone did bring a title dispute, the policy would not be renewed the next year," says Steven Pincus, managing director of insurance brokerage DeWitt Stern Group. Pincus recently learned about ARIS and says he was excited to introduce his clients to the product. ARIS offers a policy that doesn't need to be renewed. A one-time premium, between 1.75% and 6.75% of the artwork's value, buys a life-of-ownership policy that can be passed on to heirs. The insurance doesn't guarantee authenticity of the work, but prior to underwriting a sale, ARIS uses its private research database to provide vetting services and investigate the background of the artwork. In an ownership dispute, ARIS will cover legal defense expenses and the cost of the artwork if it is lost.

Art title insurance through ARIS has been available for purchase since June, 2006, and it has underwritten more than 300 policies. ARIS clients include private collectors, dealers, art funds, and major museums and investment entities, and the values of the works insured have ranged from $20,000 to $4 million. (ARIS has been approached on a $100 million transaction that hasn't yet taken place.) Shindell says that in its second year of existence the company has seen a 300% increase in business, and he anticipates that in five years, "certainly in the U.S. and portions beyond it, it will be difficult to transact something that doesn't have title insurance."

Not everyone is convinced there is enough demand to make art title insurance standard practice.

"This title issue has been around for a long time, and we've wrestled with it for a long time. While it sounds like a good idea, from a pricing standpoint it's not something that a large number of people can afford," says Mark Schussel, vice-president in charge of public relations for Chubb Insurance. Chubb offers protection against "defective title," under its broader valuable-article coverage. In the case of a title dispute, this policy will cover up to $100,000 in legal fees but will not compensate the policyholder for a lost artwork.

Plenty of Objections

Art dealers are sometimes reluctant to purchase art title insurance, citing their slim profit margin, says Shindell. Using real estate as his example, Shindell argues that the premiums will go down as more people purchase title insurance. Robert Koo, who consults with Bonham's auction house on art succession and philanthropy, says that peace of mind regarding ownership is worth the investment, especially considering that its cost is often a fraction of what an art buyer will pay in sales taxes on the transaction.

Cost concerns aside, art owners may choose not to purchase insurance for other, more personal, reasons. ARIS protects client confidentiality, but some owners, who don't want anyone to know about their collections, will even refuse to buy risk insurance—insurance on damage and theft. Art dealers also worry that purchasing title insurance will make clients think they are not doing their job in vetting the works. Others are simply used to doing things the old-fashioned way—on good faith and a handshake.

"The art industry is large and unregulated," says Charles Dupplin, chairman of Hiscox's Art & Private Client Div., which reinsures ARIS. Dupplin says he is surprised by the amount of attention ARIS has already managed to attract, but he predicts that art title insurance will become a more commonly used tool "in an industry, that like any good industry, consists of both gentlemen and of knaves."

Tatyana Gershkovich is an intern at


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