Ensure Your Future: Insure Your Business

by Daniel Grant

Courtesy of Handmade Business

Artists hope for great things in their careers--big-time commissions, rave reviews, a museum retrospective--but less fortunate events may also take place. Artists may become incapacitated, see their work damaged or lost through fire and theft, or get sued for millions of dollars by someone who tripped over the scaffolding in their studio.

One cannot ensure great success in a career, but artists, from the least-known to the most established, can insure themselves against some of the worst hazards.

After an artist sells just one piece, a market is established. That market gives value to unsold pieces sitting in a studio. Artists who have reason to view themselves as more than hobbyists will find that homeowner policies regularly exclude commercial activity, such as an art studio, from their coverage.
Caution Hobbyist Artwork

The decisions seem endless

Various insurance companies offer ''studio insurance'' or ''artist floaters'' that extend levels of protection of the physical premises of the studio as well as the tools, materials, furniture, and artwork.

Regular homeowner policies would likely cover damage to a studio in one's house if the artist is a hobbyist, although the existence of a studio and its contents should be noted on the policy. Artists who are able to earn any money from selling their work might want to consider special studio insurance.

If artists have employees, they are likely to be obligated by state law to take out a workers' compensation policy, a form of insurance covering accidents at the workplace. They also may arrange for their employees--and themselves--to have health insurance.

What Insurance is Right for Me? Creators of three-dimensional objects sometimes take out product liability insurance, in order to guard against claims if their pieces fail structurally. This can happen when a sculptor's marble statue falls apart or a glassmaker's or potter's work shatters unexpectedly.

However, the foundries that sculptors use for their metal casting usually have their own insurance protection for artworks that collapse. Twice, cracks appeared in publicly displayed sculptures by Glenna Goodacre and both times, ''the foundry stepped in to make it right,'' according to her studio manager, Dan Anthony.

Not every artist requires every type of insurance coverage. Artist Sol Lewitt spent tens of thousands of dollars a year on various types of insurance, according to his business manager, Susanna Singer. Goodacre pays $8,000 in yearly insurance premiums, which doesn't include workmen's compensation. However, policies exist for those in need, regardless of their stature in the art world, and at far more affordable rates.

Protection outside the studio

When artists display their work outside of their studios, more insurance concerns arise. There is transit insurance, which protects artwork from the studio to the fair or exhibition site and back again. General liability policies provide coverage for pieces in a booth and for accidents that may occur during a show, such as visitors falling, a fire within a booth that spreads to other booths, or shelving that collapses because it cannot support the weight of objects.

Generally, arts and crafts show exhibitors are on-the-hook for most accidents that happen within their booths, and some show sponsors stipulate that artists and craftspeople carry a commercial general liability policy. Other show organizers may make no requirement of insurance, but waive all liability for any accidents, thefts, or damage that may occur during a show on the contracts that artists sign in order to participate in the event.

For instance, according to the contract exhibitors sign to take part in the annual Summer Arts and Crafts Marketplace at Boston's City Hall Plaza, ''The City of Boston is not responsible for damage to work caused by the elements, theft, and/or vandalism.'' Similarly, exhibitors at the annual Smithsonian Craft Show are informed that ''Neither the Smithsonian nor the National Building Museum where the exhibition is held will obtain any special insurance to cover any loss, damage, harm, or injury that arises out of or occurs during the craft show.'' It is important to note that refusing to accept liability may not hold up in court, if an accident occurs as a result of the show organizer's negligence, such as visitors tripping on wires that were not adequately taped down or because of aisles that are not wide enough.

How much is enough?

There is no rule-of-thumb to determining how much in premiums buys how much insurance protection. Different carriers require certain minimum premiums. Flather and Perkins' is $250, Huntington Block's is $500, Chubbs' is $1,000, and Allen Insurance Associates' is $2,500.

Costs are established based on where one lives, the amount of the coverage, and of the deductible which is usually between $500 and $5,000. Other factors include whether a 24-hour central station alarm system exists, how inherently subject to damage the art is (glass and ceramics are high-risk items, bronze sculpture far less so) and what kinds of insurance protection are required. Other considerations consist of where the studio is located--in the artist's house, in the woods, near a fire hydrant, in the downtown section of a city--and even its construction--wood, metal, or brick. Except with studio insurance offered to groups, coverage is usually tailored to the circumstances of the individual artist.

It is not uncommon for artists to buy a certain maximum amount of insurance coverage that is less than the full value of their art and studio as a way to keep the premium lower, with the hope that no fire, for instance, would result in a total loss.
Quote by Robert Salmon

Bill Christenberry, a Washington, D.C. painter, photographer, and sculptor, has a $75,000 policy for his studio and the artwork in it--even though there is several hundred thousand dollars' worth of art there and the studio itself would cost $100,000 to replace. He pays $1,200 in premiums for this coverage from the Fireman's Fund ''because that's all we can afford,'' his wife, Sandra, said. ''We just have to hope that no damage or theft occurs that's more than $75,000 worth.''

Other artists, such as Corpus Christi, Texas, sculptor Kent Ullberg and Northampton, Mass., painter Scott Pryor, have coverage for their studios but not for the work inside them. ''It's rare that I have more than one work in the studio at any one time. When a work is finished, I frame it up and send it out to one of my galleries,'' Pryor stated.

Caution Low-Cost Policies The studios of both Christenberry and Ullberg have been burglarized, which included the theft of artwork. At the time, Christenberry had no studio insurance at all, and suffered a total loss. Ullberg later installed a central station alarm system for his studio, resulting in a small savings on the overall insurance premium.

Damage, especially for works in transit, is a far greater problem for artists than theft. Due to the higher probability of loss, a policy solely for transit insurance is often the most difficult to obtain unless coverage for the artwork itself already exists.

Some insurance carriers require central station alarm systems, while others may lower the premium up to 15 percent for artists who install them. These alarm systems, however, may cost as much as $1,500 to put in and another $30 or $40 per month to monitor. Some artists choose to forego the alarm system as the expense may outweigh the discounted premium.

At times, artists may be required to purchase insurance, such as in a contract that a corporation or public art sponsor may use when commissioning a sculpture, and this coverage usually is for general liability--for instance, a workman hurt moving or installing the piece as well as someone injured because of faulty construction or a material weakness. Most other types of insurance are optional. One kind of general liability protection that is available for commissioned work covers disputes between the artist and buyer over what the piece should be or look like.

Insurance carriers are most willing to provide studio coverage for commissioned works, because the stated price of the work in the contract alleviates the need to hire appraisers and determine market values. These companies will also frequently accept claims for commissioned works that were not completed, paying the percentage of the insured value proportionate to the degree that the work was finished

Caution Contention Between Artists and Insurance Companies ''We're very reluctant to underwrite studio policies for artists because of the difficulty of valuing the things,'' said Dr. Dietrich Von Frank, former senior vice-president of Nordstern Insurance Company, which insures art dealers, museums, and ''one or two artists only.''

''The artists have to prove that their work has value and if it hasn't sold or they haven't sold all that many works in their careers, that may be difficult,'' Von Frank said.

Artists bear the burden of proof

The burden of proving that something of value was lost, and how much that loss is, falls on the artist. Insurance companies may write a policy for an artist for a certain level of coverage, take a premium based on what the artist says his or her art is worth, but not pay what the artist claims he or she has lost.

Artists can help themselves in proving the value of their work by keeping good records of what they have sold, to whom and for how much, as well as a list of all the pieces they have in their home or studio along with the individual values they place on them. These records should be placed somewhere else or in a fireproof safe.

If determining the value of completed works is complicated, unfinished pieces are more trouble still. ''We don't do incomplete works,'' Robert Salmon said. ''Was the work half-done, two-thirds? Is it all in your head but just not down on paper? What are we dealing with? With completed works, you insure more cleanly.''

Still, some of the larger insurers of artwork, such as Chubb and Huntington Block, will underwrite policies for unfinished works, determining the stage of completion through discussion between the agent and the artist and valuing the artwork on a pro-rated share. Yet another fine arts insurance program values works-in-progress at ''cost of materials and labor, but not to exceed $5,000 for any one work.''

Surviving exclusions

The valuations made by insurance carriers are usually ''net values,'' that is, the market price of the work less the standard commission that the artist's dealer would have charged. Insurers will agree to pay the entire market value to those artists who commonly sell out of their studios without middlemen.

There is a range of coverage areas for artists, but insurance carriers also include in their contracts a number of exclusions, some of which may be modified by purchasing additional coverage.

Caution Be Aware of Exclusions Standard among these exclusions are inherent vices, dishonesty by the artist or his or her employees, wear and tear, gradual deterioration, rust, corrosion, dampness of atmosphere, wet or dry rot, mold, change in temperature, freezing, insects or vermin, water that backs up through a sewer or drain, damage due to restoration by the artist, mysterious disappearances or inventory shortage, theft from unattended vehicles, earth movements, floods, war, and nuclear disaster. Insurers may also set limits to the amount of liability they will accept for works damaged in transit or for any one item.