The System covers fine arts using two approaches. The first approach is through the shared Facilities Insurance Program. The settlement provision of this approach is payment for damaged fine arts at the lesser of the reasonable and necessary cost to repair or restore the property, cost to replace the article, or the value if on a schedule submitted to the property insurer. Insurer only provides payment to replace the item with something of similar use, not necessarily of similar value. As an example, if there is a rare painting and it is damaged or destroyed due to a covered loss, the program would only provide settlement for replacing the painting without taking into account the value due to its rarity. If an important painting was destroyed, the settlement might include the cost of a new frame and reproduction of the painting. It is also important to note there is an aggregate limit of $2.5 million per loss.
The second approach for covering fine arts is through the System fine arts inland marine policy. By scheduling fine arts via inventory submitted to System Risk Management, coverage for scheduled items is provided through the inland marine policy. The item is covered for the amount scheduled which generally should be validated through a valuation process (usually an appraisal). The policy provides for payment of the scheduled value of the item unlike the Shared Facilities Insurance Program. Therefore, should a rare painting suffer damage, the fine arts policy would pay the scheduled amount in the event of a total loss. Also, the deductible is much smaller and thus less financial risk is retained by the Member.
Fine arts can consist of many types of property.
Rare Books Manuscripts
Numismatic Objects Rugs
Natural History Objects Historical Artifacts
It is important to determine the extent of fine arts property at all locations and review whether self-retention risk management techniques should prevail or whether to transfer the risk to a commercial policy. Not placing valuable fine arts on the System’s inland marine policy could expose the Member to self-retaining the full loss.
System Risk Management encourages each Member to review their fine arts possessions and make the appropriate decision on the type of coverage needed. System Risk Management stands ready to provide any assistance you may need to work through this important process. If you have any questions, please don’t hesitate to contact System Risk Manager Henry Judah or Sr. Insurance Specialist Debbie Smith at 979-458-6330.