Hand outs
Workshop Valuation, insurance,
state indemnity, shared liability
Workshop leaders Dr. Henriëtta Galambos/ Drs. Frank Bergevoet
1
Commercial insurance
Valuation
State indemnity
Shared liability
2
Key terms
Valuation
Commercial
insurance
State indemnity
Shared liability
agreement
The monetary value of an museum object
is determined by a combination of the
cultural/historical value of the object and
the replacement value.
Based on an insurance
agreement the insurer shall pay
a compenstaion in case of an
eventual harmful event taking
place in the future, and the
insured or the contracting party
shall pay an insurance premium.
An undertaking by a relevant
authority in the borrowing state to
compensate for harmful events
occurring during the loan period
An agreement between two
museums with the objective of
sharing liability as far as possible in
respect of specific risks involved in
loan transactions. The museums
have agreed on the fact that the
Borrower has a certain freedom in
deciding whether he wants to insure
its share of the liability or not. This
implies a reciprocal relationship
between the museums which is
based on trust. The museums
consider one another as equal
partners which use comparable
standards with regard to the
organisation of exhibitions. The two
parties are also in agreement that
museum objects by definition are
irreplaceable and are no part of
economic trading (extra
comercium).
The cultural.historical value is
determined by criteria as:
•Indispensability
•Irreplacebility
•Historic significance
•Social cultural significance
•Scientific significance
•Aesthetic significance
The degree of significance is
determined by:
•Provenance
•Rarity
•Representiveness
•Condition, completeness or
•intactness
•Interpretive potential
The replacement value is determined by:
•The above criteria
•Market prices (purchase, sale, auction)
•Traend
•Loss of benefit for the Lender in case the
object is lost
3
4
5
6
7
8
9
10
State indemnity schemes
I.
What is the role of the State/Commercial insurer, the Borrower, the Lender and the Shipper in the loan chain?
1. RECOMMENDATION 2
Member States should consider adopting a law to give a formal legal basis to their state indemnity system. Member States
should specify in detail the procedure of compensation in
case of damage, in order to enhance the trust of the lenders and the transparency of the system.
EXPLANATION:
In some of the countries examined, the system of state indemnity exists, but without any formal regulation. The uncertainty
deriving from such a situation may lead to the refusal of the proposed indemnity by a lender. In many countries the procedure
for the compensation mechanism in case of damage is not written out in detail Yet for lenders it is of the utmost importance to
be fully informed on how the procedure of damage assessment will work, with special regard to the timeframe for the payment
in case of any eventual compensation.
2. RECOMMENDATION 5
Member States should set up high security and environmental standards and seek assurances that these conditions are met
before granting an indemnity. It is strongly recommended that MS should establish a national inspection regime and
accreditation of museums and galleries in order that they may qualify for such state indemnity. Up to a certain threshold the
Borrower should bear the own risk/first risk in an indemnity scheme.
Waivers of subrogation1 should neither be granted nor purchased from commercial insurers to the benefit of the Lender and the
Shipper.
EXPLANATION:
Each person participating in the indemnity chain must be encouraged to reduce the sources of risk to a minimum while the
object is under their control.
(Source: Final Report and Recommendations to the Cultural Affairs Committee on Improving the Means of Increasing the
Mobility of Collections)
11
II. X Museum as a Lender refuses the Borrower’s state indemnity and insists on its own insurer - what are your alternatives as
a Borrower?
1. RECOMMENDATION 6
Museums as Lenders should make every effort to accept 100% state indemnity when offered by Borrowers. Supplementary
insurance coverage should only be asked for and provided if a
risk assessment suggests so. The Lender should opt for the insurance offered by the Borrower, provided that the cost of the
premium for comparable coverage is equal to or lower than Lender’s commercial insurance. Museums as Borrowers should
provide the Lender with clear descriptions, on how state indemnity and commercial insurance are combined and how they
complement one another. Museums as Lenders should not seek for supplementary commercial insurance coverage for
improbable risks such as war risk in Europe.
EXPLANATION:
8 out of 20 countries (40%) with an indemnity scheme in place may resort to using commercial insurance in combination with
state indemnity in order to cover risks or periods not covered by state indemnity. As a rule, this practice is not encouraged by
Member States, unless a risk assessment concludes that an extra commercial insurance is needed, or in order to avoid loans
being withheld.
(Source: Final Report and Recommendations to the Cultural Affairs Committee on Improving the Means of Increasing the
Mobility of Collections)
2. RESOLUTION ON INDEMNITY BY THE BIZOT GROUP - 2009
Resolution #2
We agree that the priority for the coverage of loans to an exhibition should be:
1. The lender should make every effort to accept a borrower’s government indemnity when offered;
2. The lender should accept the borrower’s commercial insurance when the cost of the premium for comparable coverage is
equal to or lower than that of the lender;
3. The lender may require his own commercial insurance.
12
III. What are the reasons for refusing the Borrower’s state indemnity?
-
commercial reasons
reciprocity/mutuality
legal reasons
(Source: Bizot survey, 2007)
1. RECOMMENDATION 7
Museums lending objects should judge objectively the advantages and the weak points of the indemnity scheme offered. This
evaluation should be the sole reason for accepting or refusing the indemnity scheme.
Museums acting as Lenders always should avoid concluding agreements with insurance companies/insurance brokers on sharing
the profit related to the premium paid by a partner institution.
EXPLANATION:
Lack of reciprocity is often the reason given for refusing state indemnity. This means that a Lender does not accept the state
indemnity offered by the Borrower, for example because in the past its own indemnity scheme was refused by the current
Borrower when they were acting as a Lender. Agreements between museums and “preferred” insurance companies can also
seriously hamper the application of state indemnity schemes. This practice should be
outlawed.
(Source: Final Report and Recommendations to the Cultural Affairs Committee on Improving the Means of Increasing the
Mobility of Collections)
IV.
What can Museums do about it?
commercial reasons
reciprocity/mutuality
legal reasons
………….
………….
………….
13
14
Art insurance
1. Advantages and drawbacks of commercial insurance
 Insurance costs put a tremendous strain on museum budgets, because the expenditure represented by the premium
payments is disproportionately high when compared with the compensation ultimately paid.
 Insurance costs impose limits on exhibition projects and restrict the mobility of
museum loans.
 Insurance costs serve as obstacles for projects that are doubtful in terms of conservation, for the reason that insurers
are not willing to cover particularly high
risks. From this point of view, insurance costs are a guarantee against ill-considered
exhibition projects.
 Due to the fact that insurance companies set limits to the risks they are willing to cover, the insured party is always
subject to a certain risk; museums are thus always
inadequately covered despite the premiums paid and are likely to be faced with
significant losses.
 It is easier for a museum, when damage becomes the subject of litigation, to sue a
commercial insurance company than to institute proceedings against a sister institution.
 Long-term collaboration with the same insurance company can facilitate compensation procedures; the company can
even be conciliatory at times.
 Insurance companies have an influence on security measures taken in museums, thus helping prevent damage.
 When relying on the guarantee provided by the insurance company, museum neglect to enforce preventive security
measures.
 Insurance companies sometimes hinder the work in museums with intolerable security instructions.
(Source: Study No. 2003-4879 ordered by the European Commission)
15
16
Standard loan agreement pertaining to the collections from the Antwerp Royal
Museum of Fine Arts (KMSKA), the Groeninge Museum in Bruges and the Ghent
Museum of Fine Arts
The Parties:
The Flemish Community, represented by its Government, in the person of Mr Bert Anciaux, Flemish Minister for Culture, Youth,
Sports and Brussels Affairs;
The Antwerp Royal Museum of Fine Arts, invested with corporate personality pursuant to the Act of 27 June 1930 and the Royal
Decree of 22 September 1931, represented by Mr Paul Huvenne, Director-General;
The City of Ghent, represented by the Mayor, Mr Daniël Termont, and by Town Clerk, Mr Paul Teerlinck;
The City of Bruges, represented by the Mayor, Mr Patrick Moenaert, and by Town Clerk, Mr Johan Coens,
Taking into consideration that:
they wish to promote accessibility to the public art collection in Flanders and reinforce consistency in terms of content of the
collection presentations;
the exchange of works of arts, for both the short- and long-term, is an important instrument to this end;
the Flemish Art Collection, the cooperative between the Antwerp Royal Museum of Fine Arts, the Groeninge Museum in Bruges
and the Ghent Museum of Fine Arts, plays a significant role in storing and displaying the public art collection in Flanders;
for this reason, they wish to support the loan agreement between these three museums and remove existing barriers;
the three above-mentioned museums strive to pursue the same basic standards in terms of transport, presentation, handling
and storing museum objects.
Have agreed as follows:
17
Article 1
The agreement is based on the principle of mutuality and only pertains to the following museum objects:
-
objects that are owned by the City of Bruges and managed by the Groeninge Museum in Bruges;
objects that are owned by the City of Ghent and managed by the Ghent Museum of Fine Arts;
objects that are owned by the Flemish Community and managed by the Antwerp Royal Museum of Fine Arts
objects whose management has been entrusted to the Net Assets of the Antwerp Royal Museum of Fine Arts (pursuant to
Article 2 of the Royal Decree of 22 September 1931).
In this agreement, the terms below shall be defined as follows:
borrower: the party borrowing a museum object;
lender: the party lending a museum object;
loaned object: the museum object that is given in loan or borrowed;
transport from lender to borrower: the period that commences on the date on which the loaned object is removed from its
fixed position until such time as the receipt is signed by the borrowing museum;
transport from borrower to lender: the period that commences from the date on which the loaned object is removed from
its position in the borrowing museum for the return journey until such time as the receipt is signed by the lending museum;
lending period: the period between transport from lender to borrower and transport from borrower to lender;
agreed value: the value agreed and established in joint consultation between borrower and lender;
total loss: loss through absence, theft or complete destruction (whereby object is beyond repair).
Article 2
The parties shall agree that the museums under Article 1 shall lend the museum objects that have been entrusted to each other
under the conditions specified below.
a) During transport from lender to borrower and from borrower to lender, the borrower shall be wholly liable for any physical
damage or total loss involving the loaned object. In the event of damage, the borrower shall be required to cover any
costs to restore the loaned object to, or keep it in, the best possible state of repair (research, preservation and restoration),
amounting to the agreed value of the loaned object. In the event of total loss, the borrower shall be required to pay
compensation to the lender amounting to the agreed value of the loaned object. The lender shall decide in consultation with
the borrower whether the borrower’s risk during transport should be covered by insurance.
b) The borrower shall be liable for any physical damage from any cause which the loaned object has incurred, or seems to
have incurred, during the lending period. This being the case, the borrower shall be required to cover all costs that need to
be made to restore the loaned object to, or keep it in, the best possible state of repair (research, preservation and
restoration), amounting to the agreed value of the loaned object, up to an upper limit of € 500,000. If the object devalues
18
as a result of the damage incurred, the loss shall not be recovered from the borrower. The lender shall determine in
consultation with the borrower whether the borrower’s risk during the lending period should be covered by insurance.
c) The borrower shall not be liable for the total loss of the loaned object during the lending period, unless he is to blame for
evil intent or gross negligence. The borrower shall do everything in his power to recover the loaned object following absence
or theft. Any costs involved in tracing and recovering the object (revindication costs) shall also be borne by the borrower.
Article 3
Any restoration and/or preservation treatment shall only be carried out by a restorer designated by the lender, in consultation
with the borrower.
A loan agreement shall be concluded for each loan, which shall comprise all specific loan conditions (requirements in terms of
storage, packaging, transport, presentation, etc.) and which shall be in accordance with this standard agreement.
Article 4
The parties shall agree that the museums specified under Article 1 shall not charge each other any loan fees or administrative
costs and that they shall keep the handling costs (including storage, transport, packaging, etc. ) within reason.
Article 5
The museum objects managed by the Flemish Community, Art and Heritage Agency, Heritage department, shall be given in
loan to the museums to which this standard agreement applies under the same conditions as those mentioned above.
19
More loans, fewer worries
Risk distribution for objects from the national collection on loan to museums
Introduction
The Dutch Minister of Education, Culture and Science supports and promotes the mobility of collections, both nationally and
within the European Union. After all, collection mobility makes Dutch cultural heritage more visible and leads to stimulating
stories, surprising combinations and more academic knowledge. However, the mobility of collections is impeded by the high
costs of insurance against damage or loss. One way to remove this impediment is to have the lender and the borrower enter
into agreements regarding distribution of the risks associated with loan objects.
Existing instruments
For quite some time now, the Netherlands has had two instruments at its disposal for risk distribution in regard to the
collection. The first is the Framework Agreement for Loan Objects dating from 1989. The Framework Agreement sets out the
terms and conditions under which the State and the municipalities of Rotterdam, Amsterdam, The Hague and Gouda are
prepared to lend each other objects. The second is the Management Agreement between the State and former national
museums, dating from 1993. The Management Agreement sets out the terms and conditions under which the privatised
national museums may lend objects belonging to the State to third parties.
Minimum lending conditions
On the basis of the Framework Agreement and the Management Agreement, the departments of the Ministry of Education,
Culture and Science and all the privatised national museums can lend objects belonging to the State to third parties on the
following conditions:
• If the object decreases in value, the loss will not be recovered from the borrower.
• The borrower is only liable for the complete loss of an object (loss, theft, destruction) during transport from and to the
borrower. While the object is with the borrower, the State will bear the risk. Obviously, the borrower must do everything it can
to keep the object and, should it be lost or stolen, to regain possession of it.
• The borrower will always be liable for reparable damage to an object.
• In consultation with the borrower it will be determined whether or not the remaining risks for the borrower should be covered
by insurance.
Range of application
The Ministry of Education, Culture and Science trusts its collection managers and requires of them only that they observe the
minimum lending conditions with regard to lending objects from collections owned by the State. However, individual collection
managers may specify additional conditions, and therefore lending conditions may vary from institution to institution.
20
Practice
In practice, as far as the management of the national collection is concerned, there are three kinds of relationships between
borrowers and lenders. Within these different relationships, what is the best way for them to distribute the risks when
borrowing or lending objects?
01.
The owner of the collection is the State, the collection manager is a government department, and the borrower is
another museum.
In order to limit impediments to lending as much as possible, the Ministry of Education, Culture and Science – in this case the
managing government department – does not oblige the borrower to insure the collection against damage and loss. The
minimum lending conditions are the lower limit. However, the government department may specify additional conditions.
02.
The owner of the collection is the State, the collection manager is a privatised national museum, and the borrower
is another museum.
The Management Agreement enables museums to lend the collection on the State’s behalf without compulsory insurance, under
the minimum lending conditions referred to above. This is stated specifically in Articles 6.2 and 8 of the Management
Agreement.
03.
The owner of the collection is a party other than the national government (a foundation or a private individual),
the collection has been entrusted to the care of the State on the basis of an agreement, the collection manager is a
national museum, and the borrower is another museum.
The owner is not obliged to lend objects under the same lending conditions as the State. Before lending objects in this
category, the collection managers (national museums) must therefore ‘negotiate’ with owners about the risks they are prepared
to accept as owners and the conditions under which they are prepared to lend their objects to a third party. Preferably they will
do this under the same minimum lending conditions as those set by the State.
If the owner – in this category not the State – is unwilling to bear the cost of complete loss of the object, it may nevertheless
be prepared not to regard the current market value as the amount to be compensated. In that case the borrower and the
lender can agree to a more modest sum as compensation. The collection manager (the national museum) sets out the
agreements reached with the owner regarding terms and conditions and liability in a written document, such as a power of
attorney.
The owner may also be another government body which has the collection managed by a national museum. This government
body may authorise the collection manager (the national museum) to lend objects to third parties, under the same minimum
terms and conditions as those set by the State. This increases the range of application of the Framework Agreement.
21
In conclusion
The public deserves an opportunity to see the many exceptional collections which the State owns; and vice versa these
collections deserve a wide public. The Minister of Education, Culture and Science therefore wants institutions to make more use
of the possibilities for lending and borrowing collections. Hopefully the Minister’s policy on risk distribution for loan objects will
help to make this happen.
22
Bibliography:
General:
Resolution on indemnity by the Bizot group (2009):
http://www.lending-for-europe.eu/fileadmin/CM/public/documents/indemnity/Indemnity_Resolution.pdf
Final Report And Recommendations To The Cultural Affairs Committee On Improving The
Means Of Increasing The Mobility Of Collections, June 2010 (Esp. pp. 13-19)
http://ec.europa.eu/culture/our-policy-development/doc/library/OMC_mobility_collections_reportRome_07_10.pdf
State indemnity and shared liability:
Study (No. 2003-4879) commissioned by the European Commission and produced by the State Museums of Berlin and the
Réunion des Musées Nationaux on the national systems of public guarantees of 31 European countries.
http://www.lending-for-europe.eu/fileadmin/CM/public/documents/indemnity/EU_State_Indemnity_Schemes.pdf
Report by the OMC subgroup on State indemnity and shared liability agreements
http://ec.europa.eu/culture/our-policydevelopment/doc/mobility_collections_report/reports/indemnity_share_liability_agreements.pdf
Encouraging Collections Mobility - A Way Forward for Museums in Europe, 2010,
Esp. pp 174-183: Henrietta Galambos and Frank Bergevoet: Prevention or Compensation? Alternatives to Insurance
http://www.lending-for-europe.eu/fileadmin/CM/public/handbook/Encouraging_Collections_Mobility_A4.pdf
Recommended literature:
On indemnity and insurance in general:
The Netherlands - Indemnity for Loans Subsidy Scheme 2005
http://www.lending-foreurope.eu/fileadmin/CM/public/documents/references/Indemnity_for_Loans_Subsidy_Scheme_2005.pdf
Free movement of collections
The effects of a modified indemnity scheme on costs associated with short- and long-term loans of cultural property. Report by
Ecorys for the Dutch Ministry of Education, Culture and Science, 2004
http://www.lending-for-europe.eu/fileadmin/CM/public/documents/references/summary_indemnity_nl.pdf
European Indemnity- lecture by Frank Bergevoet at the International Exhibitions Organisers conference April 2010
http://www.lending-for-europe.eu/fileadmin/CM/public/documents/indemnity/Lecture_IEO_15_April_website_transcription.pdf
23
Glossary
Subrogation
A principle that gives the State the right to take action against any person (for example, a party which might be liable for
negligent and wilful damage) for damages in respect of a claim which has been settled.
Waiver of subrogation clause in this context is a clause waiving claims - in the event of damage to a work - against the
organisers, commissioners, curators, official representatives of the lender, transport companies, transit companies and
packaging companies, except in the case of malice, deceit or gross negligence.
Depreciation
Loss of commercial value of a work after restoration resulting in compensation paid in agreement with the insurers.
Facilities report
A document listing general requirements to be considered during the loan of an object. A Facilities Report outlines an
institution's facilities, climate, security, staffing, insurance and loan history. The purpose of this document is to assure a lender
that the borrower has a history of professional and responsible care of museum artefacts.
Nail to nail
From the removal of the work of art until its return to the lender, in other words during exhibition, storage and transportation in
both directions.
24