Many booksellers have insurance policies that protect against loss, damage, and even liability, but what can you do to protect against crime? We asked experts from Risk Strategies and Michals Insurance to give us the low-down.
In the case of credit card or check fraud, certain policies can cover loss. Kierstin Johnson of Risk Strategies says that certain Fine Art and Rare Book policies will treat the incident as a theft if the dealer ships the item out prior to the transaction going through, and then cannot collect the money. In essence, the dealer is out the book and the money and a “theft” claim could be filed with the insurance company, as the book has essentially been stolen.
However, different insurance carriers take a different view. It is important for booksellers to review the exclusions in their policies. Look for the word “conversion” or “voluntary parting.” If these are present, the insurer might not cover the claim as it considers this loss caused by voluntary parting with the property because of any fraudulent scheme, trick, or false pretense.
Especially when dealing with older material, even the most diligent and scholarly booksellers can find themselves in possession of material that does not have clear title. Brad Michals of Michals Insurance cites art theft as a $6 billion-a-year industry and questions of ownership can make sellers susceptible to loss.
To mitigate risk, insurers recommend purchasing Title Insurance. This requires a one-time premium that covers many types of collectors for the lifetime of ownership of the work and provides full defense of title and financial guarantee of the value. This is most applicable to fine art, rare books and manuscripts, and other collectibles, and covers contemporary and historical theft, import and export defects, liens and encumbrances, and illegal or unauthorized sales. Typically these policies cover materials acquired during the life of the policy and are not retroactive to acquisitions made prior to the policy being in effect.
Michals says, “It is not enough to only be aware of the provenance of a work. Provenance, which provides a history of the physical possession of a work, carries the inherent risk of being inaccurate or incomplete. The legal title accounts for the past and present full right, interest, and ownership of the work, which may or may not overlap with physical possession of the art. Title risk impacts all periods of art, not just older or secondary-market items.” Title risks also extends to liens and encumbrances. Some common scenarios where a question of title may arise include a creditor claiming a security interest in the material because the seller used the art to secure financing but did not pay back their debt to lender, divorce or family disputes, unauthorized sales, and even bankruptcy proceedings.