By Anne Rappa
When art owners entrust their treasures to a warehouse for storage, they want assurance that their art is safe – safe from theft, fire, and environmental hazards. Yet these physical protection issues represent only half of their risk exposure. The less obvious ‘soft’ issues, such as the experience of the warehouse staff and the overall management of the storage facility (warehouse operation) and its finances are also important.
In my role at Huntington T. Block Insurance Agency, Inc., I analyze risk and provide information to my clients so that they can make informed decisions about where to store their collections.
Analyze and Assess Before Selecting a Storage Facility
Cost for storage should not be the only consideration. I advise my clients – individuals, corporate collectors, art dealers and museums – to carefully consider several factors: burglary risk mitigation, fire risk mitigation, environmental hazards owing to the location and construction of the building, climate control and humidity control factors, and experience of storage facility management and staff.
Those criteria may seem standard, but during my 25 years as an insurance professional, I have found precious artwork is sometimes treated cavalierly in outside professional environments.
Clear Questions Cut to Core Details
One of my clients planned to transport a $3 million work of art outside of the United States. When I made inquiries about the warehouse where it would be stored, I learned that the storage facility did not have a fire alarm or fire mitigation system.
This was news to my client, who then rearranged the transport so that the artwork would go directly from one fire-protected location to another, avoiding entirely the warehouse that lacked fire protection. This was a simple solution to a problem that we discovered together because I asked the client to “hit the pause button.”
Similarly, in a different exchange, I posed this same question about fire mitigation to a client that planned to ship artwork for conservation valued at $10 million, I again learned that the conservation studio did not have fire mitigation in place. This time we were able to offer a different solution. This particular collection was comprised of many pieces of low value artwork that cumulatively equaled the high value. By dividing the artwork into small increments for shipping, we were able to reduce the risk to the collection. Only a small amount of art was transported and worked on at any one time.
Understanding the ‘Soft’ Issues
As I mentioned earlier, ‘soft’ issues also factor into the successful protection of a storage facility. These issues are not obvious and not easily compared. One way to gauge these soft issues is to consider the following questions:
• How well organized is the warehouse operation?
* How experienced are the warehouse employees? What background check and review process must employees undergo? Are contract employees retained? On what basis are these individuals’ backgrounds checked in advance of hiring them?
• Have you met the professionals who will be charged with the handling of your artwork?
* Is the storage facility financially sound and stable?
Missteps Can Give Mother Nature More Power
These issues played a critical role with three New York warehouses impacted by Superstorm Sandy. One facility was not a purpose-built or state-of-the-art building, but it was a very well managed business run by experienced professionals. They moved all artwork from lower floors to upper floors in advance of the storm.
Meanwhile, at a purpose-built facility under new management, employees were not instructed to move artwork from the lower area loading dock. Management mistakenly advised customers who inquired about their artwork that it was safe on upper floors. It was not.
In a third case, subsequent to Superstorm Sandy, we learned during bankruptcy proceedings that, in addition to the warehouse having sustained $40 million in damages, that it had not paid its rent for an extended period.
When a company has financial difficulties, the integrity of the alarm systems and other aspects of the facility may not be maintained. In this case, my clients had difficulty finding suitable alternative space at a common price per square foot (and the necessary amount of space) because they had to compete with many others who also had to move artwork at the same time.
Some of my clients are experienced with regard to risk mitigation. They ensure, for example, that the art storage facility loading docks are protected from the elements. Some clients engage a risk manager who understands risk mitigation while other clients have financial representatives.
Make an Informed Decision
The art warehousing industry is not regulated, so collectors need to make informed decisions about their storage facilities. Insurance companies sometimes review the adequacy of a storage facility if the item is intended to be permanent, but generally insurance companies do not rate according to location (unless in a catastrophe prone area), so location does not affect premiums. Insurance companies will examine a warehouse only if the warehouse is added as a location on the policy.
Knowledge of Safety Measures Helps Reduce Risk
• Understand how long the warehouse management has been in place and their industry experience. These are typically small businesses so their facility management decisions are important.
— Require a contract that defines the obligations of the storage facility.
• Ask if the employees have training or experience in handling art and how they are trained. I know of one facility, for example, that hires only artists to handle the artwork.
— Consider whether the building is multi-use. For instance, a restaurant would not be a desirable neighbor. Stand-alone, mono-use buildings are most secure; self-storage facilities are risky.
• Consider also the condition and uses of nearby buildings. Would your storage facility be impacted by a fire at a building nearby?
— Determine if the environmental controls in place are adequate to protect your art. ‘Gradual deterioration’ is excluded from fine art insurance policies.
• Ask if the sprinkler system is maintained. This is especially important in older buildings.
— Does it have a fire detection system that instantly notifies the fire department?
• Make sure the building is clean and uncluttered.
— Determine if the size of the loading docks is sufficient to handle your art and if they are covered to protect the art from the elements.
Fact Checking for Successful Storage
If you are storing your artwork in a large storage facility, you may also want know if the company:
* Uses a central station monitored burglary control system with cameras that monitor the facility.
• Has a process for monitoring and maintaining environmental controls, and their location.
* Performs background checks on its employees.
• Uses a barcode inventory system or a consistent alternative process to manage property and to help locate items.
It’s also helpful to review facilities’ reports. Unfortunately, these reports, which also serve as marketing tools, are not standardized and sometimes not complete, making it hard to make comparisons. Ask questions and get a written contract.
Contact your insurance professional to act as a sounding board to answer risk-related questions and offer solutions.
Collectors, insurers and warehouses all share the same goal: to avoid damage to the artwork they own or for which they are entrusted.
This passion and interest is why the loss ratio of these policies is so low and why my job is a pleasure.
About the Contributor:
Anne Rappa is a senior vice president at Huntington T. Block Insurance Agency, Inc., a division of Aon, a premier insurance broker. With more than 1,200 museums, 800 art galleries, and some of the largest universities and Fortune 500 companies’ art collections insured, HTB is the world’s leading provider of insurance to the fine art community. For more information, contact Anne at firstname.lastname@example.org or 212-479-4673.
**Check out another article by Anne Rappa about displaying art>>>
Editor’s Note: This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. You should discuss your individual circumstances thoroughly with your legal and other advisors before taking any action with regard to the subject matter of this article. Only the relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured.