In the wake of Notre Dame: Protecting our Cultural Treasures.

The fire that has destroyed Notre Dame is not the first incident to affect a site of great cultural and historical value. Unfortunately, it will not be the last. Just last year, we saw a fire destroy up to 90% of the precious artifacts and other items housed in the National Museum of Brazil. Our cultural institutions are under threat from a variety of risks both natural and manmade. What can we do to better protect our cultural treasures?

Works of art in buildings such as the Notre Dame cathedral are generally not insured because they are often priceless. Any artworks on loan from third parties would, however, be insured. While some of the large paintings at Notre-Dame could not be taken down in time, the mayor of Paris, Anne Hidalgo, said at the scene of the fire that a number of the many artworks in the cathedral had been rescued and were being put in safe storage.

Heritage sites, cultural institutions, independent galleries, collectors, and artists are uniquely vulnerable and often underprepared. Many cultural institutions have few resources or time to invest in preparedness and emergency response programs. While no amount of money in insurance payouts will bring back a lost stained-glass window or other masterpieces, not having insurance or not enough insurance is an even greater threat to works of art. For this reason, We at ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. are raising awareness to the owners of cultural items such as fine-art and collectibles on just how important having the proper coverage is.

A valuable tool to have is a knowledgeable fine-art and collectibles insurance broker to guide you in the process of managing your risk. Insuring art requires an experienced broker that knows how to navigate the often-confusing details of high-value insurance. At ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. we know art, and what it takes to insure it properly so you don’t have to. We are your resource and can answer any questions you may have regarding the protection of art and items of cultural significance.

Visit us at ArtInsuranceNow.com to live chat with a professional or call us at 800-921-1008 to speak to a friendly voice that can guide you through the process of risk management.

Art Law Guide

Art law is multidisciplinary and encompasses numerous areas of law. Those involved in the practice of art law look at a variety of disciplines, such as intellectual property, contract, constitutional, tort, tax, and international law to protect the interest of their clients.

The following is an art law primer and topics of interest to those who collect, sell, and create art.

Buying and selling

Passing of title

When does ownership of art, antiques, and collectibles pass from seller to buyer?

Title typically passes from seller to buyer upon payment of the purchase price in full. The parties can agree, in the contract, on a different triggering event, such as acceptance following inspection, receipt upon delivery post-shipping or other transfer.

An implied warranty of title

Does the law of your jurisdiction provide that the seller gives the buyer an implied warranty of title?

Under the Uniform Commercial Code (UCC), which governs sales of goods, a seller gives a buyer both express warranties and implied warranties. Article 2 of the UCC, adopted in 49 states, including California, provides the express warranty of authenticity and of title, and the implied warranties of merchantability and fitness for a particular purpose. The seller warrants that a work is by a particular artist or from a particular country of origin, period or culture. Express warranties of authenticity arise from a seller’s affirmation of facts, promises or statements about authenticity, provenance, etc. Unless specifically excluded or modified, every contract for the sale of art includes a warranty stating that the seller is transferring good title, the seller has the right to transfer title, and the works are transferred free of security interests, liens or other encumbrances of which the buyer has no knowledge. Implied warranties arise from the circumstances or conduct of the sale and not from express statements of the seller. The statute of limitations under section 2 of the UCC is four years from breach, regardless of knowledge of the breach (unless fraud can be shown).

Registration

Can the ownership of art, antiques or collectibles be registered? Can theft or loss of a work be recorded on a public register or database?

There is no registration system for works of art in California. Decisions by judges in US cases involving stolen art or fraudulent transactions often note that a comprehensive national registration system would simplify transactions and avoid foul play. There are certain non-­compulsory, non-comprehensive databases that exist for researching works of art. For example, a UCC-1 financing statement allows a creditor to file a statement identifying the creditor, the work, and perfecting a security interest by public notice. Databases such as the Art Loss Register, the Federal Bureau of Investigation’s National Stolen Art File (NSAF), the International Foundation for Art Research’s Stolen Art Alert and Interpol are all sources of information, but there is no central registry in the United States.

Good-faith acquisition of stolen art

Does the law of your jurisdiction tend to prefer the victim of theft or the acquirer in good faith of stolen art?

Statutes of limitations, determining the commencement of a claim, vary from state to state, with some favoring a rightful owner and others favoring a subsequent purchaser. California utilizes the discovery rule, which provides that actions must be brought within three years of the time the plaintiff discovers the facts giving rise to a cause of action, or, with the exercise of reasonable due diligence, should have discovered the facts.

Acquiring title to stolen art through prescription

If ownership in stolen art, antiques or collectibles does not vest in the acquirer in good faith, is the new acquirer protected from a claim by the victim of theft after a certain period?

Under US law, a thief cannot pass good title, allowing the victim to recover a stolen work irrespective of the good faith of the subsequent purchaser, but subject to the defense of the statutes of limitations. There are certain circumstances that permit a subsequent purchaser who acquired a work in good faith (ie, a bona fide purchaser for value) to acquire good title from a seller with a voidable title, but only if the voidable title arose from fraud, non-payment, etc, and not by theft. In situations involving stolen art, only void title results. However, the recovery right may be barred by the statute of limitations or by laches (an equitable remedy that precludes recovery where a party unreasonably delayed in asserting a claim, causing prejudice to the good-faith purchaser).

Can ownership in art, antiques or collectibles vest in the acquirer in bad faith after a period?

A person that acquires a work in bad faith, for example with knowledge of theft or other infirmities, cannot acquire good title, irrespective of the passage of time.

Risk of loss or damage

When does the risk of loss or damage pass from seller to buyer if the contract is silent on the issue?

Risk of loss typically passes on transfer of title, and transfer occurs upon payment unless the parties agree otherwise. The parties can agree by contract that risk of loss will transfer at a different point, for example upon delivery following shipping or once the work clears customs. However, the parties should agree in writing as it is critical to know at all times whether the buyer or seller is responsible for the risk of loss and for insuring the work.

Due diligence

Must the buyer conduct due diligence inquiries? Are there non-compulsory inquiries that the buyer typically carries out?

The due diligence obligations of a buyer will depend on whether a buyer is an ordinary purchaser or a merchant who deals in works of that kind. For an ordinary purchaser, there is no duty of due diligence imposed by law, but a reasonable buyer will enquire into title, provenance, the identity of the seller, the condition and attribution of the work, etc. Dealers and other merchants are held to a higher due diligence standard of reasonable inquiry in the trade.

Must the seller conduct due diligence enquiries?

A seller has certain due diligence obligations. A seller must satisfy the express and implied warranty obligations of the UCC, as outlined in question 2. This means a seller must be satisfied that he or she can warrant free and clear title, authenticity, etc. The seller is often contractually required to disclose any and all information in his or her possession, disclose restoration and warrant that no export or import laws were broken. A seller would be prudent to inquire into the financial stability and reputation of the buyer to avoid dishonored checks, money laundering, and so on.

Other implied warranties

Does the law provide that the seller gives the buyer implied warranties other than an implied warranty of title?

As noted in question 2, a seller gives a buyer express and implied warranties of authenticity and of title. These can be limited contractually, for example, with express disclaimers such as the work is sold ‘as is’, but such disclaimers may well reduce the purchase price. Where a merchant states, among other things, the artist, date, and country of origin, in a bill of sale, the dealer cannot disclaim authenticity or title by contract. These warranties run for a period of four years from the date of purchase.

Voiding purchase of forgeries

If the buyer discovers that the art, antique or collectible is a forgery, what claims and remedies does the buyer have?

In cases of forgeries, the UCC express warranty of authenticity provides a cause of action. In addition, to express warranties, authenticity issues can also fall within the ambit of implied warranties, as more fully described in question 2. Moreover, tort law may provide recourse in forgery cases to add additional claims to the breach of warranty under contract law. The aggrieved buyer may claim that the seller committed the tort of fraud, which occurs when the seller has made an intentional or knowing misrepresentation of a material existing fact about the artwork with the intention that the misrepresentation be relied upon, which the buyer does to his or her detriment. Another tort remedy is a negligent misrepresentation, which means that the seller makes certain false representations as to authenticity, value, etc, without reasonable grounds or basis for such belief. Negligent misrepresentation does not require bad faith or the seller’s intent or knowledge of the misrepresentation.

Voiding inadvertent sales of works by masters

Can a seller successfully void the sale of artwork of uncertain attribution subsequently proved to be an autograph work by a famous master by proving mistake or error?

Under certain circumstances, a seller may seek to void a sale claiming mistake or error, upon learning, subsequent to the sale, that the work is different from and far more valuable than the work the seller thought it to be at the time of the sale. The seller seeks rescission on the ground of a mutual mistake. Courts do not look favorably on such claims as the law seeks settled commercial transactions. But where it can be shown that there was, in fact, an honest mistake on the part of both seller and buyer, rather than the failure to investigate, conscious ignorance, assumption of the risk, etc, a ‘mutual mistake’ case can be brought. Whether a seller can succeed will depend on the parties’ expertise, knowledge and ability to discover or determine the facts upon which the mistake was based. Most courts find that the parties comprehended the risk and entered into the written contract with full knowledge thereof, and should, therefore, be required to live with the results. Seller’s remorse is not often a successful legal claim.

Export and import controls

Export controls

Are there any export controls for cultural property in your jurisdiction? What are the consequences of failing to comply with export controls?

Unlike many countries, the United States does not have export controls for cultural property. Certain exceptions do apply, though, to protect goods in commerce. The Native American Graves Protection and Repatriation Act (NAGPRA) protects Native American human remains, burial sites and grave goods, and imposes criminal penalties for trafficking in Native American remains and certain objects. Another federal law that has had a significant impact on the art and antiquities market is the Endangered Species Act of 1973 (ESA), which affects works of art that incorporate certain animal parts, and especially the regulations governing the commerce and export of African elephant ivory under the ESA, resulting in a near total ban on the commercial trade in African elephant ivory in the United States, as more fully discussed in question 46.

Export and import tax

Does any liability to pay tax arise upon exporting or importing art, antiques or collectibles?

There is no value added tax in the United States, and imported works of art are not subject to customs duties. However, state sales taxes and use taxes may be imposed, depending on the state and the circumstances. California has a statewide sales tax, and local taxes can raise the rate above the statewide tax rate.

Direct and indirect taxation

Taxes

Outline the main types of tax liability arising from ownership and transfer of art, antiques, and collectibles.

As art escalates in value, collectors increasingly treat their art collections as investments. An art collection as investment property presents unique and challenging issues from various tax perspectives. The principal areas are income tax treatment of art, valuation issues in tax and estate planning with art. There is no wealth tax in the United States.

There will be different income tax rates depending on whether the owner of an artwork is a dealer, an investor or a collector. Dealers are taxed on the gain from the sale of art held as inventory at ordinary tax rates and may take income tax deductions for ordinary and necessary expenses incurred in the business. In contrast, an investor holds art for the primary objective of making a profit from the appreciation in value of the art over a period of time (unlike a collector, whose primary objective is personal use and enjoyment). Investors are taxed on the gain from the sale of art held for more than one year at the more favorable long-term capital gains rate for collectibles, and art held for one year or less is taxed the ordinary income rate. Collectors, like investors, are taxed on the gain from the sale of art held for more than one year at the federal long-term capital gains rate for collectibles. Both investors and collectors are limited to their ability to deduct collection-related expenses.

State and local tax authorities are becoming increasingly vigilant when it comes to enforcing tax. Given the escalating values of art transactions, the Franchise Tax Board (FTB), California’s tax authority, aggressively pursues sales or use taxes due and owing on art transactions. This FTB scrutiny can take the form of reviewing shipping manifests, examining auction records, auditing gallery sales, and cross-checking museum donations, among others. Both New York and California tax authorities are watching art transactions closely and are interpreting and enforcing tax laws in an aggressive manner.

Tax exemptions

Outline any tax exemptions or special conditions applicable to art, antiques, and collectibles.

At the state level in California, there is no state tax on inheritance or gifts for California residents, making estates subject to federal estate tax only. Income tax for heirs is not applicable either, because inherited property is not treated as ordinary income.

It is expected that the new tax law, passed at the end of 2017, will change the tax treatment for art, though the scope and magnitude of these changes are not yet known. One certainty is that section 1031 of the Internal Revenue Code on like-kind exchanges will be eliminated. For art owners who qualify as investors for income tax purposes, like-kind exchanges under section 1031 provide a capital gains tax deferral opportunity, allowing owners of investment properties to defer payment of capital gains by reinvesting proceeds from sale of a currently owned property into the purchase of a new ‘like-kind’ property that will also be held for investment purposes.

Another area targeted for significant change is the deduction for a charitable donation of artwork. Museums and other cultural organizations have come to rely on the favorable capital gains tax treatment afforded to donors and are bracing for the as yet unknown shift in both estate tax treatment and income tax treatment.

Borrowing against art

Types of security interest

In your jurisdiction what is the usual type of security interest taken against art, antiques, and collectibles?

The typical security interest in art is the UCC-1 financing statement and an accompanying security agreement.

Consumer loans

If the borrower borrowing against art assets in your jurisdiction qualifies as a consumer, does the loan automatically qualify as a consumer loan, and are there any exemptions allowing the lender to make a non-consumer loan to a private borrower?

Not applicable.

Register of security interests

Is there a public register where security interests over art, antiques or collectibles can be registered? What is the effect of registration? Is the security interest registered against the borrower or the art?

See questions 3, 17 and 32.

Sale of collateral on default

If the borrower defaults on the loan, may the lender sell the collateral under the loan agreement, or must the lender seek permission from the courts?

The consequences of a borrower default are determined by contract between the parties.

Ranking of creditors

Does the lender with a valid and perfected first-priority security interest over the art collateral take precedence over all other creditors?

A lender with a perfected security interest pursuant to the UCC-1 financing statement is a priority creditor.

Intellectual property rights

Creator copyright

Does copyright vest automatically in the creator, or must the creator register copyright to benefit from protection?

The United States is a signatory to the Berne Convention and copyright law is under federal, rather than state, jurisdiction. Under US copyright law, copyright subsists at the moment of creation and the creator of the work owns the copyright without the need to register the work with the US Copyright Office. Copyright registration does provide certain protections, though, as registration is a prerequisite to instituting litigation, it puts others on notice of ownership and it allows the claimant to seek attorneys’ fees.

Copyright duration

What is the duration of copyright protection?

For works created on or after 1 January 1978, the duration of copyright under US law is currently the life of the artist plus 70 years. For works created prior to 1 January 1978, the duration rules are complicated because it depends on when and where the work was created, therefore it is advisable to seek competent counsel to assist with an analysis of duration pre-1978.

Display without the right holder’s consent

Can an artwork protected by copyright be exhibited in public without the copyright owner’s consent?

Exhibiting an artwork in public without the copyright owner’s consent implicates two distinct, and potentially colliding, rights under the Copyright Act. The copyright owner enjoys, inter alia, the right of display and the right to exhibit the work to the public. But this exclusive right is superseded by the first-sale doctrine, which provides that the purchaser of the copyrighted work (or a copy sold in multiples such as books, prints, etc) receives the right to sell, display or otherwise dispose of the physical work, notwithstanding the interests of the copyright owner.

Reproduction of copyright works in catalogs and adverts

Can artworks protected by copyright be reproduced in printed and digital museum catalogs or in advertisements for exhibitions without the copyright owner’s consent?

Museums typically request permission for image reproduction in museum catalogs and exhibition-related marketing. This permission is relatively simple to secure through US licensing entities such as Artists Rights Society and Visual Arts and Galleries Association (or international counterparts for traveling exhibitions). Museums tend not to rely on fair use for multiple-image catalog projects because fair use is a fact-intensive analysis on a case-by-case basis.

Copyright in public artworks

Are public artworks protected by copyright?

As noted in question 22, copyright attaches to a creative work at the moment of creation. Under US law, the fact that a work is available to the public does not strip it of copyright protection or otherwise affect its copyright status. A creator can be anonymous, as is often the case with street art, but the work is protected and the artist can reveal his or her identity at any time. In the case of commissioned public art sculptures, such as those commissioned by federal, state or local agencies, the copyright is routinely retained by the artist and is not transferred to the commissioning entity.

Artist’s resale right

Does the artist’s resale right apply?

California is the only state in the US that provides a resale right to the artist. The California Artist Resale Royalties Act of 1976 (CRRA) provides that a California seller of an original painting, drawing, sculpture or glass art in the secondary market must pay the US artist or artist’s estate a royalty in the amount of five percent of the resale price. The right extends during the artist’s lifetime or within 20 years of the artist’s death and applies to works where the sale exceeds US$1,000 or the sales price is more than the seller paid for the work. The CRRA was challenged in federal court when it was initially implemented, and more recently it has been subject to a series of constitutional challenges. The law has been struck down twice in recent years by federal trial courts – a 2016 appeal limited the law’s applicability rather than invalidating it entirely – and there is a current appeal of a decision holding the entire Act to be invalid on the grounds that the US Copyright Act preempts it. The decision in the 2016 appeal is expected soon.

Moral rights

What are the moral rights for visual artists? Can they be waived or assigned?

The US extended limited moral rights to visual artists through the passing of the Visual Artists Rights Act of 1990 (VARA), which provides rights of attribution and integrity. The attribution right allows an artist to have his or her name attached to a work he or she created and to disavow works he or she did not create. The integrity right prevents the intentional distortion, modification or mutilation of a work of recognized stature. The rights last for the artist’s lifetime and can be waived in writing.

Predating VARA, California enacted the California Art Preservation Act in 1979 (CAPA). The CAPA is pre-empted to the extent that it overlaps with the VARA, but it provides the following: additional rights of attribution and integrity; civil penalties and injunctive relief for violations of such rights; specifies procedures for removal of works of public art to avoid destruction; and a right to public or private not-for-profit organizations to remove a work of fine art in order to preserve it from destruction. The law also permits attorneys’ fees and is, therefore, a potent remedy for aggrieved artists in California.

Agency

Accounting to the principal

Does the law require the agent to account to the principal for any commission or other compensation received by the agent while conducting the principal’s business?

Agency principles arise in consignments of fine art where an artist consigns works to a gallery for sale. The California Civil Code provides the following: that, on consignment of fine art, the dealer shall be the agent of the artist for the purposes of the sale; the work of fine art shall constitute property held in trust for the benefit of the consignor; it shall not be subject to any claim by a creditor of the dealer; the dealer shall be responsible for any loss or damage; and proceeds from the sale of the work shall constitute funds held in trust for benefit of the consignor. The statute specifically provides that these provisions cannot be waived and any agreement to do so is void. A consignment by a collector on the secondary market, whether through an auction house or gallery, will also be subject to agency obligations; in this case, general agency duties of good faith and fair dealing arise, but there is no specific law in California governing agent commissions in art transactions.

Disclosed agent commission

Does disclosure to the principal that the agent will receive a commission allow the agent to keep the commission unless the principal objects?

Transparency in art transactions is favored but occurs infrequently. Complex transactions, with multiple intermediaries in the chain, can give rise to lawsuits, especially where undisclosed commissions are involved. California has not issued legislation in the area of agent commissions for art transactions, and case law has not provided guidance.

Undisclosed agent commission

If a third party pays a commission to an agent that is not disclosed to the principal, can the principal claim the commission from the third party?

Auction houses regularly pay an introductory commission to third parties or agents in the chain of the transaction. This arrangement is typically disclosed in the consignment agreement. If the commission is undisclosed, the principal can claim the commission from the third party or agent.

Consigning items

Protection of interests in consigned works

How can consignors of artworks to dealers protect their interest in the artwork if the dealer goes into liquidation?

It is often an unwelcome surprise for a non-artist consignor to learn of the treatment of property consigned to galleries where liquidation or bankruptcy proceedings are initiated post-consignment. As noted in question 29, California law provides that works of artists consigned on the primary market shall not be subject to claim by a creditor of the consignee (section 1738.6(b), California Civil Code). But, where the work is consigned by a collector on the secondary market, this property is available to satisfy claims of creditors. A consignor can protect his or her interest by filing a UCC-1 financing statement (see questions 3 and 17), which provides the consignor with a perfected security interest and status as a priority creditor.

Auctions

Regulation

Are auctions of art, antiques or collectibles subject to specific regulation in your jurisdiction?

The auction trade is highly regulated. New York, the US center for auctions, has well-developed laws governing the auction industry. Though California has far less auction activity, there are a number of auction houses doing business in the state and the large auction houses have recently resumed holding sales within California. The California Civil Code governs auction houses and auctioneers generally, and provides the following: that the auctioneer must disclose any liens or encumbrances on the auction item; that a bill of sale or invoice must reference the catalog or other written materials; deposits, blank checks or deposits exceeding purchase prices must be returned within specified periods; and auctioneers misrepresenting the nature of an auction item are subject to civil fines and required to refund the purchase price. Auction houses are also governed by the UCC, which contains numerous auction-specific provisions in section 2.

May auctioneers in your jurisdiction sell art, antiques or collectibles privately; offer advances or loans against art, antiques or collectibles; and offer auction guarantees?

Auction houses may sell works privately as well as at public auctions. The private sales department of an auction house is an increasingly important and active area of the market and is viewed as favorable by consignors and buyers both for privacy and for the timing of a sale. Auction houses are free to offer guarantees, to advance funds on a guarantee, to take a financial interest in a work and to make loans against a work. All such interests and activities must be disclosed in the auction catalog.

 

Claims to Nazi-looted art

In your jurisdiction, in what circumstances would the heirs of the party wrongly dispossessed typically prevail over the current possessor, if a court accepts jurisdiction and applied local law to a claim to art lost during the Nazi era?

Holocaust-era art has been the subject of numerous lawsuits in the United States. The US has not adopted legislation specifically addressing claims for recovery of Nazi-era looted art. As indicated above, however, a possessor of looted art remains subject to potential suits by Holocaust victims or their heirs because good title to stolen or converted property cannot be transferred, even to a good-faith purchaser.

In California, the legislature addressed the burden of Holocaust-era litigation by adjusting the state statute of limitations for bringing suit. The first statute, enacted in 2002, eliminated entirely the statute of limitations for bringing suit as long as the action was brought on or before the end of 2010. That statute was deemed unconstitutional by the courts and a subsequent statute, section 338(c) of the California Code of Civil Procedure, was enacted to extend the statute of limitations from three to six years for claims for recovery of fine art from a dealer, gallery, auction house or museum, commencing upon the discovery of both the identity of the possessor and the location of the work. The statute expressly provided that such actions must be commenced on or before the end of 2017 and thus, unless revived, the benefits of law have expired and the standard jurisdictional limitations apply under the discovery rule.

Is there an ad hoc body set up to hear claims to Nazi-looted art?

There is no body or tribunal in the US set up to hear Holocaust-era claims. These claims are brought by litigation in the appropriate court with jurisdiction to hear the claim.

Lending to museums

Responsibility for insurance

Who is responsible for insuring art, antiques or collectibles loaned to a public museum in your jurisdiction?

Typically, the museum will insure the work and provide a certificate of insurance to the lender. On occasion, lenders may decide for their own business reasons to keep their insurance in place and will subsequently note that responsibility in the loan agreement.

In addition, the National Endowment for the Arts (NEA) administers the US Arts and Artifacts Indemnity Program, which provides coverage for loss or damage to eligible works on loan to US museums and organizations holding exhibitions. The indemnity covers both works from outside the US while on exhibition in the US, and eligible US works while on exhibitions outside the US.

Immunity from seizure

Are artworks, antiques or collectibles loaned to a public museum in your jurisdiction immune from seizure?

The United States has a federal program in place that provides immunity from seizure. The US Department of State administers the Immunity from Judicial Seizure Act, which protects from seizure certain foreign works of cultural significance that are brought into the US for temporary display or exhibition as loans to US museums.

On the domestic side, the NEA also administers a program of domestic indemnity for works owned by public and private collections in the US while on exhibition in US museums and not-for-profit organizations. There are specific eligibility requirements and dollar limits for all indemnity programs.

Cultural patrimony

National treasures

Is there a list of national treasures?

The US does not have a list of national treasures. The National Gallery of Art and the Smithsonian Institution are the only US national museums, all other US museums are public or private not-for-profit organizations.

Right of pre-emption

If the state is interested in buying artwork for the public collections, does it have a right of pre-emption?

California does not have a right of pre-emption for the purchase of works for public collections. Similarly, there is no such federal right under US law.

Automatic vesting in the state

In what circumstances does ownership in cultural property automatically vest in the state?

Ownership of cultural property does not automatically vest in the state unless such property is found on federal or state land. The NAGPRA (see question 13) vests in the affiliated tribe the title to certain Native American objects.

Illegally exported property claimed by foreign states

How can a foreign state reclaim in your jurisdiction cultural property illegally exported from its territory?

Foreign states can, and do, seek to reclaim cultural property illegally exported from its territory into the United States. These actions can take the form of litigation instituted by the foreign government in the appropriate federal court under the National Stolen Property Act or can be in the form of a judicial seizure action pursuant to a valid treaty. In addition, the Archaeological Reserve Protection Act prohibits exchange in interstate or foreign commerce of any archaeological resource taken in violation of the law, and section 497 of the California Penal Code prohibits receiving stolen property in a foreign country and bringing it into California in the knowledge that it was stolen.\

Anti-money laundering

Compliance

What are the anti-money laundering compliance obligations placed on the art trade?

Anti-money laundering compliance is voluntary in the United States in art transactions, but any prudent buyer or seller, regardless of whether they are an art merchant, will make efforts to comply with ‘know your customer’ due diligence inquiries, and will ensure that funds used to purchase art will not be subject to future forfeiture or disgorgement. Anti-money laundering provisions are increasingly being written into purchase agreements.

Endangered Species

CITES

Is your jurisdiction a party to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)?

The United States is a party to the CITES Convention. The ESA (see question 13), which implements CITES in the US, prohibits the taking, possessing, selling or offering for sale in interstate or foreign commerce, importing, exporting, delivering, carrying, transporting or shipping in the course of a commercial activity, any ESA species listed as endangered, or any part thereof. In addition, the ESA has the authority to issue protective regulations for ESA species identified as threatened.

Is the sale, import or export of pre-CITES endangered species subject to a license?

The ESA allows for an ‘antiquities exception’ for articles containing endangered species or parts thereof that are at least 100 years old; are composed in whole or in part of any endangered species or threatened species; have not been repaired or modified on or after 28 December 1973; and entered at a port designated for the import of ESA antiques.

A permit is required from the US Fish and Wildlife Service, a federal agency within the Department of the Interior, to import or export endangered or threatened species under the ESA. See www.fws.gov.

Is the sale, import or export of post-CITES worked or antique endangered species authorized? On what conditions?

See question 45.

Specific endangered animal products

Are there any special rules for works of art made of elephant ivory, rhino horn or other specific endangered animal products?

As noted in question 13, the United States issued regulations increasing the protection for African elephants. Such regulations do not exist for rhino horn. These regulations are complicated, and address import, export, commercial, non-commercial and personal use.

For commercial purposes, the import of African elephant ivory is prohibited. For non-commercial purposes, the import of worked elephant ivory is allowed if it was legally acquired, removed from the wild prior to 26 February 1976, and is either part of a household move or inheritance, part of a musical instrument or part of a traveling exhibition.

For commercial purposes, only the export of items meeting the ESA antiquities exception is allowed. For non-commercial purposes, only the following exports are allowed: (i) items meeting the ESA antiquities exception (see question 45); (ii) items legally acquired, removed from the wild prior to 28 February 1976, and are either part of a household move or inheritance, part of a musical instrument or part of a traveling exhibition; (iii) certain worked ivory that qualifies as pre-ESA; and (iv) law enforcement and bona fide scientific specimens.

Interstate and foreign commerce in African elephant ivory is prohibited except for items that qualify as ESA antiquities, and certain manufactured or handcrafted items that contain a de minimus amount of ivory and meet certain criteria. Intrastate commerce (ie, selling within a state) is permitted for worked ivory lawfully imported prior to 18 January 1990, the date the African elephant was listed on Appendix 1 of CITES, or ivory imported under a CITES pre-convention certificate. In both cases, the seller must demonstrate the facts to support the exception.

Non-commercial movement within the US (within and across states) of legally acquired ivory is allowed. The personal possession and non-commercial use of legally acquired ivory is also allowed.

Consumer protection

Cancelling purchases

In what circumstances may consumers cancel the sale of art, antiques or collectibles?

California courts permit a claimant to cancel a sale where fraud can be proved, and where a seller breaches the express and implied warranties of authenticity, title or merchantability. Additionally, the California legislature has enacted a consumer protection statute, the California Fine Prints Act (the Farr Act), for fine art multiples. The Farr Act provides that dealers must issue a certificate of authenticity with any sale of a fine art print, and specifies the requirements thereof, including the artist’s name, whether the work is signed, the medium or process, the year and the size of the edition. It also provides that the dealer must post in a conspicuous place a sign that notifies consumers that California law requires disclosure of certain information concerning prints or photographs and that a person can request such information prior to purchase. Failure to observe such requirements can result in penalties or cancellation of the sale (or both).

In addition, in 2016, the legislature passed a strict consumer protection statute governing autographed collectibles. In light of California’s unique status as the center of the entertainment industry, regulation of memorabilia was deemed an important state interest.

Duties of businesses selling to consumers

Are there any other obligations for art businesses selling to consumers?

There are general obligations under California law for art businesses selling to consumers. For example, compliance with business registration and filing requirements, and website requirements such as terms of use and privacy policies. As noted in question 29, art dealers have certain obligations to their artists, but the Farr Act is the only art-­specific consumer protection legislation in California.

Update and trends

Updates and trends

Online art auctions are increasing in frequency and dollar volume in order to compete for the attention of a younger generation of potential collectors that is media savvy, appreciates efficient and convenient user experiences and may prefer the anonymity of an internet transaction in some cases. Strengthening of consumer or tax regulations in this area can, therefore, be expected.

 

-Christine Steiner Attorney at Law

 

For more info or inquiries please call us at 800.921.1008 and visit us at ArtInsuranceNow.com

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Art Fair Season is Here: What did you buy?

Art fair season is upon us, bringing together an extraordinary concentration of artworks, private dealers and galleries. The question between collectors attending these fairs is “what did you buy?”.

Well, we have a more important question to those art buyers… how did you insure it? Having a knowledgeable fine-art and collectibles insurance broker to guide you in the process of managing your risk is an integral part of the art buying process. Insuring art requires an experienced broker that knows how to navigate the often-confusing details of art insurance.

From an insurance standpoint, fairs represent a high-risk time for galleries, dealers and, of course, clients. Traditionally, the gallery or dealer covers the delivery of the piece to the new owner. But it’s important to know what questions to ask so you understand the details and/or can negotiate conditions to reduce risk, for example:

  • Who’s responsible for the piece at what stage of the transaction – is it yours once it is paid for, when the title is transferred, or when it’s in your possession?
  • Who’s responsible for packing and shipping – the gallery or a third-party fine arts vendor? Make sure professional fine art packers & shippers are used!
  • Is the appropriate packing or crating (in some cases, customized) being used for the type of piece? Think about size, fragility, composition, etc
  • If you’re at an international event, or a fair with international galleries represented, will the piece need to go through US Customs and, if so, what precautions will be made and by who?

Once home, how do you protect your investments?

Being a newcomer to the art scene can be intimidating. Someone starting to collect may not necessarily purchase very expensive pieces initially, so they may not think their art is valuable enough to warrant an insurance policy. We provide new collectors with the same coverage, service, and claims handling as someone with a higher collection value. And they are also protected against exposures they are vulnerable to in their day to day lives.

There is no reason a collector of any size should feel their investment isn’t enough to be insured properly. When your collection grows, so will our partnership with you. The limits can be increased and we can continue to provide support and peace of mind over the years.

At ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. we know art, and what it takes to insure it properly. We are your resource and can answer any questions you may have regarding the protection of artwork, tools, studio space, museums or galleries.

 

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Are Your Art and Collectibles Covered for Disaster?

Fires, floods, tornadoes, super-storms, and even man-made disasters like construction accidents can cause havoc to your home, gallery, or studio. Many are prepared with emergency plans and supplies but unprepared when it comes to keeping an up to date inventory on precious belongings, art, and collectibles in the case of a claim.

Trying to create an inventory after the fact can be just as stressful as enduring the event itself. Before starting an inventory, contact your insurance agent to ask what kind of documentation is required if you ever need to file a claim. It can be as simple as creating a spreadsheet and supplement it with photos and receipts, the more info the better. Keep a copy off-site or in your email and not near the location where the art is housed, this can be a lifesaver and prevent delays in getting the replacement value.

The most valuable tool in ensuring everything goes smoothly is having a knowledgeable fine-art and collectibles insurance broker to guide you in the process of managing your risk. Insuring art requires an experienced broker that knows how to navigate the often-confusing details of high-value insurance. At ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. we know art, and what it takes to insure it properly so you don’t have to. We are your resource and can answer any questions you may have regarding the protection of your art, tools, studio space, or gallery.

Even if you never need to file a claim, an inventory pays off. A complete inventory can help you purchase the right amount of insurance and should the unforeseen happen, you can focus on rebuilding rather than scrambling for the details on what you may have lost.

Visit us at ArtInsuranceNow.com to live chat with a professional or call us at 800-921-1008 to speak to a friendly voice that can guide you through the process of risk management.

 

Protecting your Art Collection

There are obvious dangers for an Art Collection. Fire, water, theft and even light is also a big threat, and the damage it can cause is irreversible. Even certain framing methods can destroy a work over time. What are the best ways to make sure your art is safe, secure, and displayed to its utmost advantage? ArtInsuranceNow.com has some helpful tips.

Thieves once robbed the home of an avid collector. The police asked for photographs of the stolen items but had to settle for dinner–party pictures in which several of the works appear incidentally in the background, often cropped and out of focus. This is not a good way to document your art.

You should continually evaluate your art collection, particularly when art values are high. Collectors should document their holdings and store the information (or a copy of it) off-site, not attached to, or near the works themselves. When properly insuring an item, the more documentation the better.

Technology can help organize your collection with easy to use inventory management software and apps. There is a variety of both free and paid “cloud” software (which means you can access it from any device anywhere you can connect to the internet). These applications can allow users to store an image of a work, as well as such information as price, appraisal value, purchase date, location, description, condition, and provenance. Collectors with many objects and multiple residences who don’t keep track of where everything is might not notice for months that something is missing.

Another way to protect your collection is to have a reliable alarm system for the art locations. From the stories we hear as a fine-art insurance agency, the amount of poorly maintained or even unused alarm systems at valuable properties is quite surprising. Also, if collectors get a series of phone hang–ups—six or more in a short period of time we advise you to call the police, because your house is possibly being cased. Crooks can be trying to look for a pattern to see when you’re home and when you’re out.

While there are many art heist stories to be told, transit and the environment remain the two biggest risks to works of art. We advise not to skimp when packing and shipping a work—and consider carefully where you display it. If you hang a painting in direct sunlight and it fades, most policies won’t cover it. Over 60 percent of claims are related to losses incurred in transit, including moving art around the collectors’ own homes. Bad packing and handling are avoidable problems and professional art packing and shipping have become more affordable.

No one wants to lose a piece of art but it happens, more often than we’d like to see so the best way to protect your collection is with due diligence and a fine art policy from ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. We can guide you in obtaining the right fine art insurance for your unique requirements at great rates. For more info visit www.artinsurancenow.com and live chat with us, call us at 800.921.1008 or apply for a free quote below.

 

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Brazen thief snatches 19th century painting, and calmly walks out.

 

A man who stole a painting off the wall of Moscow’s Tretyakov Gallery over the weekend has been arrested. The suspect took a Crimean landscape by Russian artist Arkhip Kuindzhi and carried it through a room filled with visitors on Sunday evening while posing as a gallery worker, the footage aired on Russian state television showed.

This is the second incident to hit the Russian capital’s gallery in less than a year. The first was vandalism against a painting of Ivan the Terrible, which was severely damaged when slashed by a visitor. Each year, art thefts account for around four to six billion dollars of losses worldwide. Due to the magnitude of the problem, the International Criminal Police Organization, commonly known as Interpol, continually collects data about the many art thefts and recoveries. With 192 member countries, the international police organization catalogs around 50,000 stolen works of art.

While the Arkhip Kuindzhi artwork has been recovered, sadly many stolen pieces are not, and vandalized artwork often times is declared a total loss. This may be heartbreaking to the owner but the financial hit is also devastating. The good news is you can acquire the proper art coverage to recoup your investment in the eventArt of a loss. We at Bernard Fleischer & Sons Inc. / ArtInsuranceNow.com are true art lovers and we put the Artist, Collector, and/or Owner first when designing a custom policy.

Not every art owner is the same, there are different circumstances, building structures, security systems etc. We ask the right questions and evaluate them to get you the best policy at the best premium. Our online applications are tailored to your requirements and created for your convenience. For example, artists can apply for and bind a policy to cover their studio, art, art in transit, tools, and materials all while having their morning coffee at home.

Learn how you can protect your art while on public display, at home, in studio, or in transit. Visit ArtInsuranceNow.com to live chat with an agent or call us at 800.921.1008

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5 Star Service for Art Insurance with ArtInsuranceNow.com

Are you an artist, art dealer, collector, exhibitor, or gallerist that requires asset protection? ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. has provided insurance services for the art community for 70 years. We love educating our customers and giving them the right tools to create or maintain a successful art business or collection.

Many artists surveyed do not have the proper insurance or coverage for their situation, the numbers are quite alarming. Our goal is to educate and provide resources that the art community requires to mitigate the unique risks they face.

As the global art market expands, risk also increases. Artists, auction houses, and art dealers often display art at multiple locations to discover a larger number of buyers, including a growing number of art fairs around the world like Art Basel.

The high volume of art exchanging hands increases the risk of improper handling, accidental damage during transit, and theft. Therefore, this increases the number of fine art insurance claims. If your art studio or location is not properly covered, you could be headed for a loss.

We at ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. take pride in our stellar customer service. (Don’t take our word for it, check our 5-star ratings on Google HERE) We will walk you through the process step by step and get you insured fast, and with great rates via our user-friendly online applications. We are uniquely qualified to handle all art related risk management solutions due to our extensive experience in the field, and to put it simply, we just love art!

Call us at 800-921-1008, apply online at ArtInsuranceNow.com and live chat with us, or visit our offices at 29 Broadway, Suite 1511 New York, NY 10006

Houston Art Studio Destroyed in Fire.

Smash Design, the Popular Houston Art Studio behind some of the city’s most recognizable art pieces has been destroyed by fire. The devastating blaze is suspected to have been ignited by a recently added LED light panel, destroying everything of value including several hundred thousand dollars’ worth of pneumatic tools and supplies. Also destroyed in the blaze were some commissioned works already sold to other businesses.

The family-owned art studio has conceived and built sculptures for popular brand displays for

James Harden and Adidas, as well as sets for comedian Gabriel Iglesias. Their impressive sculptures also adorn places like the Toro entrance at the Houston Texan’s fan shop.

Smash Design Portfolio
a selection from the Smash Design Portfolio

Artist Steven Ramirez, the creative force behind the shop has said that due to his type of business, the art shop was never covered by insurance. This is a great loss for an artist whose heart and soul goes into the work they develop which is why the first thing we do at Bernard Fleischer & Sons Inc. (ArtInsuranceNow.com) is to educate artists on the pitfalls of insurance and how to avoid them. In this case, it appears that the issue was not the type of business that caused the coverage exclusion, it was the type of insurance policy. Our standalone artist’s policy covers the studio, tools, and of course the art whether in the studio, during transit, and art exhibitions.

Many artists surveyed do not have the proper insurance or coverage for their situation, the numbers are quite alarming. The goal is to educate and provide the resources that working artists require to mitigate the unique risks their businesses face.

Call us at 800.921.1008 to receive a competitive quote for comprehensive coverage that includes transit, multiple locations and more.  You can also visit us at www.ArtInsuranceNow.com to learn more and live chat with an agent or apply for your free quote below.

 

Rare Art Destroyed in “Stampede”

 

Denver police have arrested an 18-year-old man charged with destroying several pieces of historic Chinese and Mayan rare art that were part of an exhibition depicting animals through the ages at the Denver Art Museum.

Jake Siebenlist was arrested for alleged felony criminal mischief. He’s accused of shattering valuable figurines and damaging rare Mayan vessels and Chinese vases, Siebenlist allegedly shoved museum patrons out of his way while grabbing and throwing the rare and fragile sculptures, and pushing exhibits over, causing them to shatter, according to an arrest warrant affidavit.

The suspect, Jake Siebenlist at his court hearing.
The suspect, Jake Siebenlist at his court hearing.

The museum is currently in the process of examining the art pieces to determine which pieces can be repaired and which ones are beyond repair. The suspect’s motive is not yet known.

The weirdly coincidentally titled “Stampede” exhibit has paintings and objects depicting animals in artwork throughout the centuries and in different cultures, including Deborah Butterfield’s horse sculptures and artwork by Frederic Remington and Georgia O’Keeffe.

Police say 10 Pieces of art were damaged or destroyed, causing over $20,000 worth of damage to the exhibit. Siebenlist allegedly tried to damage two paintings that were protected by plastic display cases but was unable to damage those artworks.

These are the risk exposures when an exhibition is open to public view. Something to keep in mind when loaning or exhibiting fine art. Even when loaning to reputable museums you should always have your own coverage. ArtInsuranceNow.com / Bernard Fleischer and Sons Inc. helps to mitigate those risks by providing comprehensive coverage to Artists, Museums, Galleries, Collectors, and Dealers.

Call us at 800.921.1008 to receive a competitive quote for comprehensive coverage that includes transit, multiple locations and more.  You can also visit us at www.ArtInsuranceNow.com to learn more and live chat with an agent or apply for your free quote below.

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The Art World comes together at fairs, Insurance keeps it glued together.

This is the time many Galleries, Dealers, and Artists move inventory away from their premises to many different art fairs. Over the last few years art policies have changed, when was the last time you checked to see if you have the right coverage at the right cost?

Preparing for an art show/fair creates additional perils, which we address below;

  • Transit for Dealers, Artists and Collectors: Make sure your policy covers the art while in transit by truck, airplane and boat. There are some policies in which you must notify your Insurance carrier when shipping or attending any art fairs. There are better policies that have these automatically built-in at no additional cost.

 

  • Beware of transporters selling you insurance coverage: Many motor truck cargo policies or inland marine policies from truckers exclude art or when included, there are limitations like the maximum they will pay per complete conveyance, meaning all of the items including other people’s property, so there may not be enough limit to pay you in case something happens.
    • Another limitation is the cause of damage, exclusions of car, train, and plane accidents.
    • Valuation variants: Many of these policies will be based on the price not at current retail value but on what you paid for the item or net consignment.
    • Partial Damage: Many transport company’s insurance policies require you to use specific restorers or conservators without the option of declaring the art a total loss.
    • No payment for devaluation of damaged art.
    • Valuation is based on weight not value. Check the bill of lading before you sign anything.
    • Packing and crating issues: The companies have this condition in almost 90% of the policies. As long as the art is packed in a manner that other dealers would have packed, you are in the clear.
    • Payment: Most transporter insurance polices will pay the transporter who will then pay you. But they can deduct storage, transport and other expenses from the money received from the loss. These polices are in the transporter’s name not yours, hence checks are made out to the transporter not you, unless you are a “loss payee” under their policy.

 

Be sure to buy the right coverage so you can focus on selling your art.

Call us at 800.921.1008 or visit ArtInsuranceNow.com and live chat with a professional to answer any questions you may have regarding your particular situation.

 

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