Back in January, I wrote about the high cost of insuring major art museum exhibitions. The topic comes up again this week on the weblog of TIME Magazine's art writer, Richard Lacayo in the final installment of his interview with Neal Benezra, Director of the San Francisco Museum of Modern Art (SFMOMA).
Here is the relevant passage:
BENEZRA: I wish the government would reassess this fractional gift thing.[*] This was something that was not broken and didn't need to be fixed. There was not abuse. Certainly not here there wasn't.
And something has to be done about insurance. We're in earthquake territory. We're in a 10-year-old building that's as rock solid as could be. But because of our geography, we're having a terrible time with insurance. This spring we had the Brice Marden show from MoMA and the Picasso and American Art show from the Whitney both here at the same time. The insurance value of the art on loan to us at that time was close to a billion dollars. We had such an insurance problem. There's a federal indemnification program for international loans. What we're lobbying very hard for now is that the indemnification program should work for domestic loans as well.
The nature of the current indemnification program, in which the U.S. government effectively acts as an insurer of traveling exhibition, was described in an informative 2005 article from Chubb Insurance, written from the point of view of collectors who might be considering lending works to an indemnified exhibition. It makes the program sound like a reasonable and effective risk management tool:
Under the Arts and Artifacts Indemnity Act, claims against an indemnified exhibition are paid by the US Government, but since its inception there have been only two claims. These were both over 10 years ago and totaled less than $105,000. This is in spite of the fact that the program has indemnified 746 exhibitions for 211 museums in the United States, saving museums millions of dollars in commercial insurance premiums.
This is all sounding like a pretty good deal for museums but here’s why it’s also a good deal for collectors: it’s not that easy to get an exhibition approved for indemnity coverage. The reason there have been so few claims is that standards of care must be extremely high for an exhibition to be accepted. There is a very lengthy application which requires that the applicant provide very specific details about the nature of the proposed exhibition, places and dates, values and very specific information about packing, shipping and security arrangements, including for fragile objects which may not qualify for the indemnity. Applicants must supply condition reports and climate control data at exhibition sites and storage facilities, and there are also questions about loan fees and contractual arrangements with lenders. There are two other requirements that are of particular interest to appraisers and insurance carriers; all shipments must be accompanied by a courier, and lender values must be confirmed by a third party. The end result is that if you are lending to an indemnified exhibition you can sleep pretty well; your treasured pieces will certainly be well cared for.
Administrative responsibility for the program lies with the National Endowment for the Arts. The NEA Arts Indemnity Program Information Advisory details some of the program's terms and limits:
The Arts and Artifacts Indemnity Act allows coverage for a single exhibition up to $1,200,000,000. The total dollar amount of indemnity agreements which can be in effect at any one time is $10,000,000,000. The deductible amounts are as follows:
If the value of items covered by an indemnity agreement for a single exhibition is:
1. $2,000,000 or less, then coverage under the Indemnity Act extends only to loss or damage in excess of the first $15,000 of loss or damage to items covered;
2. more than $2,000,000 but less than $10,000,000, the first $25,000;
3. not less than $10,000,000 but less than $125,000,000, the first $50,000;
4. not less than $125,000,000, but less than $200,000,000, the first $100,000;
5. not less than $200,000,000, but less than $300,000,000, the first $200,000;
6. not less than $300,000,000, but less than $400,000,000, the first $300,000;
7. not less than $400,000,000, but less than $500,000,000, the first $400,000;
8. $500,000,000 or more, the first $500,000.
The GAO's Catalog of Federal Domestic Assistance** notes an interesting precondition to inclusion of an exhibition under the indemnification program:
Items must be of educational, cultural, historical or scientific value; and their exhibition must be certified by the U.S. Department of State to be in the national interest.
I have found nothing to indicate that any otherwise qualified exhibition has ever been determined not to be "in the national interest."
For an idea of the sort of exhibitions that have been benefiting from federal indemnification, consult the NEA's list of exhibitions covered by the program for 2007-2008.
Given what look to be sound and strict "underwriting" and loss prevention practices, and the very low incidence of covered losses historically, Neal Benezra's wish to see the Arts Indemnity Program expanded to purely domestic exhibitions doesn't seem particularly unreasonable.
* Benezra's reference to "fractional gifts" relates to tax policy and to the deductibility of certain partial donations of art to museums. Donn Zaretsky's Art Law Blog explained the issue at length last year, and recently noted moves afoot in Congress to revisit it.
** Prior to researching this post, I had never heard of the Catalog, which effectively provides "one-stop shopping" for those seeking Federal largesse:
The online Catalog of Federal Domestic Assistance gives you access to a database of all Federal programs available to State and local governments (including the District of Columbia); federally-recognized Indian tribal governments; Territories (and possessions) of the United States; domestic public, quasi-public, and private profit and nonprofit organizations and institutions; specialized groups; and individuals. After you find the program you want, contact the office that administers the program and find out how to apply.
The GAO proudly promises that you can "search for assistance programs in a variety of ways!" -- exclamation point in original -- including the "Top 10 (Percent of) Catalog Programs By Number Of Hits." Top programs include the Christopher Columbus Fellowship Program ("To encourage and support research, study, and labor designed to produce new discoveries in all fields of endeavor for the benefit of mankind") and the oddly-named Unsolicited Grant Program of the U.S. Institute of Peace (which, although its grants are "unsolicited," nonetheless accepts applications which are to be "vetted through a rigorous, multi-stage process of review"). Anyone inclined to believe that their Government is Giving Money Away for No Good Reason will find ample reinforcement for that belief in these pages.