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Protect your Picasso. Art, antiques, other valuables may need own insurance policy

ONLY 5 to 10 percent of all stolen works of art and antiques are ever recovered, according to the Federal Bureau of Investigation. That's not a great record, but at least that small group of individuals should be happy - they'll get their things back.

Or will they?

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Many works are recovered months or maybe years after the theft, and often an insurance claim has been paid. In such an instance, the insurer has title to the work and can do with it as the company likes.

Most of these companies aren't in the business of collecting fine art or other valuables, so generally they hope to dispose of them as quickly as possible.

They may offer the works back to the original owners - in exchange for the amount of the claim, more or less - or just put up the art for sale at auction. There are many options, but insurers don't make their money from recovered items. Their patience is understandably limited.

Underwriters claim that everything is negotiable, and policies can include whatever riders and stipulations both the insurer and client agree on.

But artwork should be given special attention and may require its own separate policy, depending upon the value. This may be also true for other valuables, like rings and silver. The policy may include a general coverage for an entire collection (say, $10,000 of insurance), or each work may be listed with its appraised value.

An annual appraisal advised

An annual appraisal of the collection or other valuables helps determine the amount of insurance needed. The value of artwork could go up or down, and premiums will be figured accordingly. It is also possible to ``schedule'' works, so that insurance coverage and premiums go up a certain percentage periodically.

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It's up to collectors to have their works evaluated by a licensed appraiser who is reputable and considered an expert in the particular area of art. The insurer will usually take the appraised value as gospel, and establish premiums accordingly, if he has the right credentials.

The system is not without occasional problems. The Chubb Group, one of the largest art insurers in the country, paid a collector about $1 million several years ago when his art collection was stolen.

The works were eventually recovered and reappraised by Chubb, which found that they were actually worth closer to $200,000. A suit by Chubb against the collector has been pending in the courts in New York for a couple of years.

Other insurers who have paid out claims have found recovered works to be fakes. Whether any legal course of action is taken depends upon whether or not the error was an innocent one.

Without some sort of fine arts (or other valuables) rider on an insurance policy - a relatively inexpensive addition, usually $50 annually for $10,000 in coverage - an individual may receive a settlement for a stolen or damaged valuable that is far below the piece's actual value.

Most regular insurance policies have deductibles, some of which are rather high. If some thief walks off with a signed etching or small sculpture, a $1,000 deductible may wipe out the possibility of a claim (although, the lower premiums one paid because of the high deductible somewhat make up for the loss).

Most riders for fine arts or other valuables have no deductible, and everything is protected.

Investment needs protection

One effective way to reduce the premium for both regular and valuables policies is to install a security system. Many insurers will require collectors to have a ``central station home alarm'' system, which hooks up private homes to a police station or to the security department of an alarm company. One of the benefits of this can be a 6 percent reduction (on the average) in premiums on homeowner policies and some negotiable discount on a rider.

Another kind of protection many insurers provide is an identifying code that is engraved on valuables.

The code assists the insurance company and the police if works become lost or stolen. This system, called Identifax, is available to companies through the state offices of the Independent Insurance Association of America (to which all licensed insurers belong). Generally, it's offered to clients as a free service.

Apart from these precautions, it is also advised that collectors photograph the works they are insuring and place the photographs in a safe deposit box - along with a sheet listing their individual value, the name of the artists, and the bill of sale.

What happens when artwork is recovered

Fine arts (and other valuables) riders must be specific and spell out such things as what should happen if a stolen work is recovered and a claim has been paid. Most collectors would like to reserve the right of first refusal. They may not want the work back if it has been damaged, or if they are happier with the amount of the claim (especially if the value of the work has diminished).

Additional costs - such as packing and shipping the work if it turns up overseas, or legal fees if the question of ownership is to be decided in court - may dissuade the original owner from taking it back as well.

``A lot of the time, the original owners don't want the work back for some reason or another,'' says Huntington Block, president of the insurance company of the same name, ``and, at that point, we dispose of the work as best we can.''

He notes that his company paid claims on many of the stolen works of art that were found a few years ago in the home of Philadelphia doctor Frank Waxman, who was convicted of their theft. Dr. Waxman stole more than 100 small pieces, totaling about $2 million. He visited art galleries and put works into shopping bags. Mr. Block states that several of the galleries were not eager to have their works returned.

Fine arts riders and blanket coverage

Some policyholders choose to write into their riders the process by which a recovered work is sold back to them.

In some cases, it may be for simply the amount of the claim. But - if the work has been lost for many years, during which time its value has increased greatly - the insurer may also receive additional compensation.

For example, the company may get back its claim, plus the compounded interest on that money for the years the work has been lost. The individual and insurer may also agree to bring the work to auction and make a split of the proceeds.

Most collectors have some form of ``blanket'' coverage for their works - though it is usually less than the entire appraised value, simply because the premiums would otherwise be too high.

Art galleries, for instance, may have $1 million in insurance coverage even if their holdings are twice that in value. The high turnover of works makes it impossible to keep up with reappraisal and inventory requirements if the coverage were to be itemized.

Most museums have insurance only on the buildings, using the money that would have paid the enormous premiums for the collection on security systems (guards, alarms, cameras, sprinklers). All those who insure their art collections are betting that damage or theft won't be total.

Over the past decade, insurance companies have found themselves in the thick of the $5 billion to $10 billion annual problem of art theft, and some insurers have raised their premiums to cover their own losses.

Charles Moore, a private investigator who has worked on a number of major art theft cases, states that ``many thefts occur in order that [the works of art] can be ransomed by an insurance company.'' He adds that insurers pay less to the thief than they would in settling a claim with the owners - ``and thieves know that.''

William F. Smith is an insurance adjuster instrumental in tracking down the stolen artworks in Frank Waxman's home. He notes that ``a lot of companies don't know much about art and back away from insuring it.''

He adds that those companies with a long track record in art coverage are more likely to ``negotiate a policy that reflects the interests of the collector and the insurer and the art.''

Not all companies alike

``A regular adjuster isn't geared to talking about a gouache,'' says Huntington Block. ``It's likely he doesn't know what a gouache is.''

Good reason, then, to find an insurance company that knows a little something about art and has a track record in insuring it.

Among the companies with considerable experience in this sort of coverage are the Chubb Group, Aetna Life & Casualty, the Hartford Insurance Company, Huntington Block, Insurance Company of North America (INA), Lloyd's of London, and St. Paul Fire & Marine.

It is important to remember that the federal government does not regulate insurance companies. It's up to the individual states.

You should not assume that the same provisions one company offers will be matched by another insurer in a different state - even if it uses the same terminology.

Finally - in case you're wondering - a gouache is similar to a watercolor, though the medium is denser and more opaque.

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