Friday, 5 September 2014

Collectables Crime: Title Insurance for Antiquity Collectors

Leila Boulton's text ('Caveat Collector', Private Wealth magazine,  September 2, 2014) on the use of fine art and other high-end collectables as investments includes a discussion about insurance of collectables to cover issues emerging over legal title. The author points out there is a huge risk in buying items on the poorly-regulated 'art' market, there is for example an increasing likelihood of picking up a forgery (the article - see blog post above - suggests that in general, 40% of the items currently ion this sector of the market are forgeries). One of the best risk-reducers is due diligence  concerning an item's purported origins and its collecting history. Verification of collecting history is not only an aid to determine whether an object is authentic. It also provides information vital to determining who has legal title to the piece. In the area of art generally, and that includes artefacts treated as 'ancient art', portable items are subject to wartime looting, seizure by coercion (as in 'Holocaust art'), theft, archaeological looting and smuggling.
Even buying through reputable auction houses is not enough protection. Auction houses perform some due diligence, but as the seller’s agent, they can typically rely on the seller’s representations about ownership without assuming legal title risks. Unless they’ve committed fraud, the limited warranties that auction houses provide will generally absolve them of responsibility for selling items with title defects.
The article includes the recommendation that buyers of collectables ask for title insurance policies when purchasing them and introduces Judith Pearson, president of New York-based ARIS Title Insurance Corporation"
Pearson [...]  says stolen items account for only 25% of title exposures in the collectibles markets. Seventy-five percent of the risk comes from encumbrances, such as creditor and tax liens, and issues involving lack of legal authority to buy, sell, give, donate or loan items. Title insurance helps protect against the risk of title defects that could result in the loss of [...]  pieces through litigation.  Pearson cautions that common phrases on provenance documents, such as “owned by a private collector” and “sold by a dealer,” are signs of the market’s opacity. Although wealthy collectors often wish to keep their ownership of important works confidential to avoid becoming targets of thieves, vague terms can also mean trouble. “Those red flags, or what we would call ‘gaps in ownership,’ may be really small gaps, or really big gaps, but gaps almost always exist,” says Pearson. Pearson says ARIS can reduce the risks of title defects through underwriting protocols and access to confidential ownership information that transacting parties often don’t, or won’t, share with each other. “We identify the gaps, determine how defensible they are and insure over them,” she says.
Now here's an idea. Who is going to be the first dugup ancient coin dealer or antiquities dealer to offer in place of undocumentable bland title assurance ( "they can't touch you for it, trust me, wink wink"), actual title insurance? What would the premium be on items with huge glaring gaps in their collecting history, where at any moment another Medici archive could come to light after a future arrest in a source country? Which ancient coin dealer would dare? Or maybe the ACCG should get together with an insurance firm and get a policy for its members (like the NCMD and FID did in the UK for its metal detecting members) as a service to the collecting community and an expression of confidence in the market. I said who 'dare' quite deliberately. Go on, we dare you.


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