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Murals Revisited

Author: Chris Boggs

Recently the VU released a video discussing the property exposure created by interior and exterior murals – check it out here.

As was discussed in the video, murals may be considered art that can and should be covered under a fine arts coverage form. In the video we discussed the need to purchase this protection from a specialty market; however, shortly after the recording session, we discovered some proprietary property forms provide specific fine arts protection within the policy wording. This changes the landscape a bit.

While Insurance Services Office's (ISO) commercial property policy does not exclude coverage for fine arts, the policy does contain a limitation on valuation. ISO's commercial property policy and its businessowners policy (BOP) both limit loss settlement to actual cash value (ACV) for works of art. Proprietary forms may not contain this same limitation. For example, one carrier values works of art at the least of:

  • The price at which the property could likely be sold prior lo loss or damage if offered for sale in a fair market on the date the loss or damage occurred;
  • The cost of reasonably restoring that property; or
  • The cost of replacing that property with substantially the same property.

Murals, if the carrier considers them a fine art, probably couldn't be sold (short of selling the building), so the appraised/market value in the first option probably would not be a viable consideration. This leaves only the last two valuation options. When applying these valuation procedures to a mural, do these values substantially differ from the mural's ACV? (The VU penned an article on the applied meaning of ACV and how it differs by state. To review this information, click here.)

Taken at face value, these proprietary valuation options do appear to offer higher payouts than the amount paid using ACV. If the mural is only partially damaged, the carrier agrees to pay the cost to restore the mural. And if it is destroyed completely, this sample wording states it pays the cost of replacing the property. If it cannot be replaced (the artist is dead or for some other reason), the settlement would probably be a negotiated value.

If such proprietary wording is available, the insured may have better protection that that offered by ISO forms. The valuation methods in stand-alone specialty fine arts forms may be similar to the proprietary wording above, but it will likely be subject to negotiation and manuscripting based on the specifics of the mural.

Forget Everything Just Discussed

Forget value and valuation methods, the first and most important question that must be answered is, does the mural qualify as a work of art or fine art? If the answer is no, then the only value any carrier is going to pay is the cost of the paint – regardless if it's an ISO or proprietary form; and further, no specialty carrier is going to (or should) offer protection for a mural that does not qualify as fine art.

What is the basis for deciding if a mural qualifies as a work of art or fine art? Although ISO property forms do not address the concept of fine arts, some proprietary forms do clarify the meaning. One form defines “fine art" in part as: paintings, etchings. pictures, tapestries, art glass windows… and similar property of rarity, historical value, or artistic merit.

Presumably, any specialty market willing to provide coverage for a mural would apply a similar definition.

If a mural does not qualify as anything more than a painting on a wall, the insured shouldn't expect any more from the carrier than the value of the paint. However, if a mural has historical value or artistic merit based on the subject, location, artist, historical significance or other factors, it may qualify as a piece of fine art and require specific protection.

Coverage for the Mural

What are the insured's options when a mural is valuable and considered a work of art or a fine art. If the property coverage is written by a carrier using ISO forms, the only way to garner the necessary protection is by purchasing a stand-alone fine arts policy. However, if the carrier extends property coverage via a proprietary form, the form itself may provide the necessary protection if it specifically extends coverage to fine arts.

Anytime you encounter a mural:

  • Gather the necessary details to decide if the mural qualifies as a work of art needing coverage;
  • Explain the possible coverage gaps to the insured; and
  • Recommend the insured have an appraisal done. This is necessary regardless the source of protection. If coverage is written on a separate form, the underwriter will need the appraisal; if the coverage is extended from the policy form you must remember to include this value in the application.

More recommendations on insuring murals are contained in the video.

Last Updated: June 22, 2018

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