‘Bring in the lawyers’ ran a recent headline on the art market in the Spectator.
I read the piece with interest, but not surprise. Many people feel they have to make some huge conceptual leap to take them from the art to the legal world, but the rapid entwining of the two is something I’ve been watching for a while.
I think it’s an inevitable offshoot of the rapid appreciation the art market has undergone in recent years. As the article points out, it would be a very casual person willing to purchase a multi-million pound house without extensive contracts being drawn up, so why should buying a Picasso be any different?
We are also living in an increasingly litigious society and, combined with the enormous sums now at stake, this is informing the way people act in the art market. In an example given in the Spectator, Lord Edward Spencer-Churchill sued London dealer Gerard Faggionato when he felt that he didn’t get enough money for the sale of a Basquiat in 2012. Civil lawsuits are springing up all over Europe in the wake of the Beltracchi and Mumford forgeries, the fruits of which passed through some of the most prestigious galleries and dealers undetected for many years.
The increased threat of lawsuits poses two key risks to art market professionals. The first is financial – legal fees can run to thousands of pounds even if the case is settled in their favour. If it isn’t, with art worth so much, the damages can run to millions. The second risk is reputational. The art world is very subjective (see Keith Graham’s excellent blog post on the difficulties of pricing modern art), and so maintaining a professional and knowledgeable reputation is crucial for a sustainable business.
It is in reaction to this new landscape that we developed Professional Indemnity insurance for those involved in the art market. It is tailored to cover legal fees arising from risks, such as negligent valuation and defective title, faced specifically by art professionals like dealers, conservators and valuations services, and has high limits of indemnity in recognition of the high prices art now commands. In this increasingly litigious environment it can offer art professionals a measure of future financial security for their business. It also has an eye to the reputational risks, offering coverage for mitigation costs that aim to head off a court case.
A few years ago, insurance like this would have seemed a heavy-handed way of dealing with these risks in the art market. Today, when the stakes are higher and the lawyers are poised, it makes far greater sense.
Chris Allen, Executive Director, RKHIS