Profile: ARCA lecturer Dorit Straus on insuring art

by Catherine Schofield Sezgin

Dorit Straus, Vice President and Worldwide Specialty Fine Art Manager for Chubb & Son, a division of Federal Insurance Company, will again teach the course, Investigation, Insurance and the Art Trade, in Amelia at ARCA’s 2011 Postgraduate Program in International Art Crime and Cultural Heritage Protection Studies program. Straus’ course discusses fine art insurance; the role of the insurance company, the agent and the broker; the insurance contract; risk analysis and selection; losses and claims; theft losses; and interaction with police and law enforcement.

Ms. Straus published an article, “Implications of Art Theft in the Fine Art Insurance Industry”, in Art & Crime: Exploring the Dark Side of the Art World (Edited by Noah Charney) that explains the relationship between insurance and art theft. She has also written a chapter on insuring art in a book by Diane McManus Jensen, Valerie Ann Leeds, and Ralph Toporoff, The Art of Collecting: An Intimate Tour Inside Private Art Collections with Advice on Starting Your Own (Antique Collectors’ Club Ltd, 2010).

Ms. Straus, the Worldwide Fine Art Specialty manager for Chubb Personal Insurance, joined Chubb in 1982. Prior to Chubb, she studied archaeology at Hebrew University in Jerusalem, Israel, lectured on Biblical Archeology and worked at several museums (The Jewish Museum, The Peabody Museum of Ethnography at Harvard University, and the Museum of Contemporary Craft in New York, now known as the Museum of Art and Design). She has underwriting experience in Property, Casualty, and Entertainment as well as fine art. She was a key member of OBJECT ID of the Getty Institute, which established universal criteria for describing works of art. She speaks on art and insurance at international venues including seminars on risk management for museums and cultural institutions at Shanghai University. She was the keynote speaker at a fine art risk management seminar sponsored by the government of Taiwan; a featured speaker at a conference at Dresden, Germany; and a panelist at a seminar on art theft at Cambridge University, United Kingdom, where she met Noah Charney, ARCA’s founder.

ARCA blog: You’ve been quoted in the press that the most common art insurance claim stems not from theft, but from damage done while the art work is in transit.

Ms. Straus: Actually, its damage from a variety of causes not just damage in transit. In severe winter weather, it is not uncommon to see a lot of water damage claims to fine art. For example, excess weight of snow resulting in roof collapses and seepage of water from various sources including below grade seepage. During the summer we see water damage to fine art as a result of severe rains or air conditioners that leak and saturate walls along with the art that hangs on that wall.

Fire, smoke and soot also are major perils that we see on a regular basis. Improper packing or crating and poor installation are also common causes of loss.

I do not mean to minimize theft as an important cause of loss, but as I have written in various articles, there are ways to prevent theft through central station alarms, and through inspections by the insurance company of the premises to point out the weak spots in the security system.

What is much harder to predict is when a dealer who has been in business for many years, goes rogue and starts selling art on consignment in violation of his consignment agreements and or selling the works and not remitting the proceeds to the owners. This can become more prevalent during bad economic times.

ARCA blog: You’ve also said that when a museum purchases insurance to protect its collection, the insurance companies follow up with security inspections and risk management recommendations such as how to protect the art against damage from fire.

Ms. Straus: This statement needs to be qualified. Not every insurance company has staff on hand that can go out and inspect the museum facilities. So it should be a very important consideration by the people responsible for purchasing the museum insurance policy to ascertain if the company has such capabilities. They should also be looking at the caliber of the people who are doing the inspection. The risk management assessment should include not just the security system and its components, but also the fire protection and procedures, including the adequacy of the fire suppression capabilities of the museum and the local fire department. They should be looking at protective devices as well as the human element. Are employees vetted? Do they undergo periodic background checks? Is there dual accountability? There are lots of other considerations that should be taken into account to address and prevent insider theft.

ARCA blog: It’s too expensive for museums to insure their entire art collection. Do they select a blanket limit up to a certain amount that would cover any paintings stolen from the collection? And do insurance companies get nervous when there’s a rare painting by van Gogh, Vermeer, Rembrandt or any other artist that seems to attract thieves?

Ms. Straus: The way museums purchase insurance varies and each museum, unless it is a governmental entity, makes those decisions based on their own assessment of risk taking. In the US, most museums are private not-for-profit organizations with a board of directors who make those decisions. Also, those decisions are made based on the size of the collection, the type of collection, and by the finances of the institutions. Major art museums are going to take a different approach than historical societies, or a natural history museum.

Many museums in Europe are state owned and therefore the decision making on risk transfer is not their own, but is directed through a governmental entity. There are also government indemnity programs that are similar to purchasing private insurance. However, generally when museums borrow from one another or from private collectors the risk transfer then is typically insured for the value of the loan amount.

When underwriting a museum, one considers the total collection and evaluates the exposures as a whole; one does not look at individual works by certain artists and decide that those are more attractive to a thief.

ARCA blog: You once said that stolen works of art are only recovered 10 percent of the time and, on average, take 20 years to be recovered. Are you surprised when objects are noticed in pre-sale catalogues by large auction houses? Do you expect that they should have done more due diligence or examined the painting’s provenance before listing the work for sale? Is provenance research too time consuming for many of these art houses?

Ms. Straus: I am not surprised that items are flagged as stolen in pre-sale catalogues. The sheer volume that goes through the auction houses is so enormous and rapid. Very often these works have already passed through several owners before they reach the auction house, and these owners may indeed be “innocent purchasers”. I do expect, however, that the auction houses conduct due diligence investigations when they sense that there may be something wrong with the consigners or the work itself, whether it’s a question of illegal ownership or authenticity.

ARCA blog: What kind of art insurance issues have kept you up at night, metaphorically speaking, in the past six months? What do you see as the riskiest areas in insuring art?

Ms. Straus: We have been going through terrible economic times, so I am concerned about moral hazard either by fraudulent insurance claims or from dealers who are stealing from their clients.

I am also particularly concerned about the trend of art as investment and regarding art as an asset class. I don’t want to generalize, but when you start thinking about art as a commodity rather than as an object that expresses our humanity and our culture, it loses its importance and it becomes interchangeable solely as a money exchange. Maybe I am naïve, but when you value something for more than its monetary value you have a personal stake in it along with making sure that you invest in protecting it properly.

The application deadline is today, January 21, for ARCA's 2011 Postgraduate Program in International Art Crime and Cultural Heritage Protection Studies.