Doesn't my homeowner's insurance policy already cover the legal title risks of my art collection?
Only a licensed title insurance company may offer true title insurance.
Recently, several property insurers have recognized the art title risk and collectors’ need for protection against the ownership risk by adding free-of-charge-endorsements to their policies, which reimburse collectors for a small portion of the costs incurred in defending legal title to one’s fine art.
For a number of reasons, these floaters fall short of providing adequate protection. They provide minimal reimbursement dollars; the collector must incur the cost and then seek repayment; the value of the work is not covered when a work is surrendered; and there is no coverage if the insurer determines that the collector “should” or “could” have known about the title defect when the collector acquired the artwork.
These endorsements are part of annually-renewable homeowner policies. The collector must remain with the insurer in order for the endorsement to continue. The endorsements have not been tested, and they likely do not provide any protection if and when the homeowner consigns their art, for instance, to a dealer for sale.
The nature of these fine art floaters reflects the fact that homeowner insurers do not actually underwrite legal title risks in the art world, and they cannot and do not effectively insure against these risks.
Title disputes in the art world are very complex. Underwriting the title risks for art and other important collectible assets requires unique expertise and defending against these risks is expensive and complicated.
Only a true title insurer actually underwrites and assumes legal title risks.