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Insurance Buy-Back Provision

Art owners who insure their artworks should make sure they have a buy-back provision in their insurance policy. This gives a theft victim the option of regaining title to the artwork if it is recovered. It usually involves paying back the insurance money received from the claim.

The provision can be important for several reasons. First of all, many victims have an attachment to their art and would prefer to have the art back rather than the insurance money. This is especially true if the art is a family heirloom, a sentimental keepsake, or an integral part of a fine art collection.

Another possibility is an inaccurate appraisal of an object that turns out to be worth far more than the insurance payout. In one case, a rare Tiffany lamp was stolen that was insured for $75,000. When detectives finally located the lamp, they learned it had recently sold at auction for $275,000 – an amount far beyond the victim’s expectations - (see The Chauffeur Did It . In another case, a Henry Merwin Shrady statue was given to a family by a relative. Although it had been regularly appraised, no one knew its true value because a similar statue had never come up for auction before. When the statue was stolen, the insurance company paid out the appraised value of $39,000. However, during the course of the investigation, detectives learned a similar statue from the same cast had recently sold at auction through Christie’s for $123,500. The family opted to repay the $39,000 so that they could regain title to an artwork they now knew was worth many times that amount - (see Monarch of the Plains).

Even if the insurance settlement is equitable, the stolen artwork may not surface for many years. By the time it is recovered, it could be worth far more than the original payout. An example of this is a Chagall gouache worth $17,000 that was stolen from a museum in New York. When the artwork finally surfaced 20 years later, it was now worth $200,000.

Insurance companies rarely include buy-back provisions in their policies but most will allow a client to regain title to an artwork. They would rather honor the request than lose a client. Also, insurance companies would rather avoid the effort required to liquidate a client’s recovered property in order to recoup their loss. Insisting upon a buy-back provision will not only ensure a victim’s right to exercise this option, it will also obligate the insurance carrier to notify the victim if there is a recovery.