[MSN] An Idea Whose Time Has Come? The model for art ownership protection: Real-estate title insurance.

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An Idea Whose Time Has Come?
The model for art ownership protection: Real-estate title insurance
By STEVE YAHN

In a celebrated case reported at length in this newspaper, a Norman Rockwell
painting that had been hanging in the home of movie mogul Steven Spielberg
turned out to be stolen, and the Hollywood tycoon pledged to return the
"Russian Schoolroom" painting to its rightful owner. Done by Rockwell on a
trip to Russia, the canvas shows a group of Russian schoolchildren
contemplating a white bust of Soviet leader Vladimir Lenin.

Mr. Spielberg's promise has become embroiled in a legal battle between two
claimants to the work, with the Federal Bureau of Investigation caught in
the middle between these two parties and Mr. Spielberg, who is holding the
painting in the meantime. What isn't so well known is that if Mr. Spielberg
had been able to purchase something called "art title insurance," his
defenses would be in a lot better shape than they are now.

Art title insurance is an old notion, says Richard Gray, co-owner of Richard
Gray Gallery in New York and Chicago and the unofficial dean of American
gallerists. But only with the rise of attention generated by art stolen
during the Holocaust and quite recently reclaimed, as well as the surge of
disputes surrounding looted antiquities -- not to mention the booming art
market in general -- has this concept sprung to life in new forms.

For example, one potential dispute that was amicably resolved led to the
recent return of J.M.W. Turner's painting "Glaucus and Scylla" by the
Kimbell Art Museum in Fort Worth, Texas, to the heirs of John and Anna
Jaffe. This occurred after an investigation into the provenance of the
painting, which had been in the museum's collection since 1966, revealed
that it had been seized by the pro-Nazi Vichy regime in France in 1943.

Not long ago, John Singleton Copley's portrait of William Posonby, second
earl of Bessborough, was returned to Harvard University more than 30 years
after it was reported missing. The painting belonged to the estate of
private collector William M.V. Kingsland, who died in March. This, too,
could have been a source of dispute but was resolved when Alexander Acevedo,
an art dealer, bought the painting from the estate and gave it to Harvard.

Art title insurance functions in a fashion similar to real-estate title
insurance, protecting a policyholder's right to title though not
guaranteeing the authenticity of a work of art. Title is title, but a
"Monet" could be by Monet himself or by a knock-off artist.

Why didn't the idea of art title insurance stick until recently? The short
answer is that there has never been enough demand. "There isn't enough
volume for art title and authenticity insurance, since demand is so low you
don't get enough premium to offset a potential loss. So you have to charge a
lot of money, and that charge is almost unaffordable to the majority of
people who would rather self-insure the risk," says LeConte Moore, managing
director and fine arts specialist at New York-based DeWitt Stern Group.

"I will say, though," notes Mr. Moore, one of the top fine-arts brokers in
the world, "that there is much more renewed interest in this insurance today
because paintings and photographs have escalated in value far beyond what
anybody imagined. So there are a lot of people concerned about it and
questioning whether they should buy the insurance."

Somebody who tried and failed to promote a form of art title insurance was
Lloyd Goldenberg, an attorney with Bryne Goldenberg & Hamilton in
Washington. In the late 1990s, a group Mr. Goldenberg was a member of tried
to sell a service to bank trust departments that made multiple inquiries
into the marketplace value of a work of art and then proposed to issue a
certificate of title based on those findings.

But the marketplace wasn't ready. Says Mr. Goldenberg: "The marketplace --
and these are sophisticated people -- just doesn't treat art, this type of
asset, the same way they treat all other types of assets. They seem to treat
it as art first, and an asset second, living in this Never Never Land in
which they're going to trust their reputable dealers and auction houses
above all else. The dealers and auction houses might be reputable, but they
don't guarantee title."

Yet another firm that tried to promote the notion of art title insurance was
mighty Hiscox, a syndicate of Lloyd's of London and perhaps the premier name
in art insurance in the world. Hiscox's downfall was that given the nature
of its business, it had to renew art title contracts on an annual basis, and
most customers were looking for the life-of-ownership protection that comes
with owning title to a home in the U.S.

So what has changed? A fledgling but well-backed insurer called ARIS Corp.
entered the market last June. To date it has not signed up any clients
(though some major candidates are pending), but it has attracted plenty of
support, including at Hiscox, which is serving as its reinsurer.

"I've always felt there's a market there" for insuring against defective
title, says Robert Read, fine-art underwriter at Hiscox and arguably the
most influential arts-insurance practitioner in the world. "It's a real
issue, and we like the product ARIS has put together. They spent an enormous
amount of time with their due diligence."

ARIS is the result of the brother-and-sister collaboration of its chairman,
Lawrence Shindell, and president, Judith Pearson. The heart of what the two
are offering is title protection; research and vetting services; and payment
of all the expenses of a legal defense should one become necessary.

Differing from Hiscox's former method of operation, an ARIS policy covers
the full lifetime ownership of a work. If a work of art is proved to have
bad title and must be returned, ARIS will pay for its full value -- as would
have been the case in the Spielberg instance.

With all the disputed art claims around, maybe this is the time that art
title insurance will catch on.

Mr. Yahn is an art and media critic based in Croton-on-Hudson, N.Y. He was
recently named Editor, Special Projects of ArtCalendar magazine.

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