Perishable Art

Perishable Art: Investing
In Works That May Not Last

Collectors Struggle to Preserve, Insure Contemporary Pieces;
Replacing the Dead Shark

By M.P. MCQUEEN

May 16, 2007; Page D1

In the white-hot market for contemporary art, a delicate issue is emerging: How do collectors preserve and insure works that may be short-lived -- often by design?

Some of the priciest contemporary works -- such as Damien Hirst's dead shark in a tank and Jeff Koons's 40-foot-high topiary puppy -- are made from perishable or delicate materials whose deterioration isn't covered by insurers. Other works, including pieces by Andy Warhol and Mark Rothko, use synthetic paints that may not hold up over time and aren't easily restored; video art uses electronic and digital media that may stop working. Some installation pieces are even meant to disappear over time.

Aging and wear affect all art, but the ephemeral nature of some contemporary art has become more problematic as values have soared. Prices of contemporary and postwar art shot up 44% in 2006 and 19% annually over the past five years, while art prices overall rose nearly 12% a year from 2001 to 2006, according to Artasanasset.com, a Web site founded by the creators of the Mei/Moses Fine Art Index.

This week's auctions at Sotheby's and Christie's in New York are expected to break records set last year for postwar and contemporary art with more than $1 billion in sales. Among the items up for grabs this week is Andy Warhol's 1963 "Green Car Crash," made of synthetic polymer and acrylic on linen, which has a presale estimate of $25 million to $35 million. A Damien Hirst painting in household paint on canvas with dead butterflies on it, "Untitled (Birthday Card Suite)," from 1999, is expected to sell for about half a million dollars.

But even as prices for such pieces vie with those for traditional oil paintings and sculptures, many of their materials are proving significantly less durable, breaking down in a matter of years rather than decades. "The materials they're made with are more delicate and more fragile and more susceptible to loss," says Katja Zigerlig, art specialist for American International Group Inc.

Dead animals, insects and hair decompose. Acrylic paints dry out and flake. The newspaper used in some works by Robert Rauschenberg has faded. If damaged, some newer paintings can be harder to restore than some Old Masters from the 1600s, experts say, because synthetic paints are hard to match. Some complex works may even require the replacement of parts -- not normally an option in traditional fine art -- and many will require special care if they're to preserve their value.

As he browsed the auction preview at Christie's on Saturday, Fred Brandt, 57, a prominent dermatologist in Miami and New York, said he had wondered whether the butterflies in a Damien Hirst painting he was considering might be a problem. Dr. Brandt said he asked his advisers about the butterflies' possibly disintegrating, but was told not to worry. Still, he added, "I will check out every butterfly and look at them before buying."

A similar Hirst recently was considered a total loss because butterfly wings on it were damaged in moving. While moving damage was covered, the wings couldn't be replaced because they came from a rare butterfly species, one insurer said.

Protecting such pieces' value poses unique problems for collectors. Insurance policies almost always rule out insuring art objects for "inherent vice," which includes natural deterioration such as rot and mold, or mechanical wear and tear. Vermin and insect damage, which affect textiles and objects made from organic materials, are also excluded from coverage. Insurance policies cover only damage from unexpected events like fire, theft and accidents.

Because of the difficulty of restoring some fragile contemporary artworks, some art insurers are charging as much as double the premium they would charge for more durable pieces such as oil paintings. Policies also may stipulate that collectors take painstaking conservation efforts, such as controlling light and temperature in the environment, as a condition of providing coverage. If the conditions aren't met, claims won't be paid.

While raising the personal-contents limit on one's homeowner policy or buying a personal-articles floater might be good enough for insuring ordinary collectibles, it isn't sufficient for major works of contemporary art, because of their complexity. Experts advise getting coverage from an insurer specializing in art.

Contemporary art also requires frequent reappraisals in this fast-moving market to avoid being underinsured. Also, buyers of some of the more avant-garde video, computer and multimedia installations should consider obtaining a document signed by the artist that states which elements of the artwork can be replaced or repaired without compromising the artist's intent or the piece's integrity, art scholars and insurance experts say.

Repairing and restoring contemporary art can pose novel problems. One example is the 1991 installation piece by Damien Hirst "The Physical Impossibility of Death in the Mind of Someone Living," a 14-foot tiger shark suspended in a tank of formaldehyde that is considered the seminal work of the Young British Artists movement. Purchased in 2005 by hedge-fund billionaire Steven A. Cohen of Greenwich, Conn., from the collection of British advertising tycoon Charles Saatchi for a reported $8 million, the dead shark was rotting from the inside out, causing it to take on a withered appearance and clouding the fluid in the tank.

Last year, Mr. Hirst replaced the original shark with another one at his workshop in England -- at Mr. Cohen's expense, a cost well in excess of $100,000, Mr. Cohen's spokesman confirmed. Though the centerpiece of the work has changed, it hasn't been regarded as damaged or diminished in value, though the issue is open to question among art historians.

A number of the other art works currently provoking bidding wars among hedge-fund billionaires and young collectors are vulnerable. The ephemeral media used in such artworks are often part of the artist's message of life's evanescence or -- strikingly, in view of their current values -- represent a rejection of conventional measures of aesthetic and commercial value.

In some conceptual art, breakdown is the point. For instance, the late Félix González-Torres illustrated the subject of loss and disintegration with a series of works, one a pile of 175 pounds of individually wrapped multicolored candies representing his lover's body wasting away from AIDS. The pile diminishes as viewers help themselves to the candy. Ownership of such a work usually consists of a license to re-create it.

Some types of postwar art are so new that they present unprecedented technological issues. Video and computer installation artworks, such as those pioneered by the artist Nam June Paik, who died in January 2006, use electronic components such as television monitors that wear out, or recording media whose formats become obsolete, like audio and videotape and computer files.

Other post-World War II objects are made of plastic, vinyl and acrylic, which came into use in the mid-20th century and aren't proving as durable as initially thought. For instance, some plastic Eames chairs have begun to break down gradually, and some acrylic paintings by the artist Mark Rothko are fading, insurers say.

The fragility of these types of art poses big risks for fine arts insurers because art policies are among the broadest of all policies, covering just about all the standard risks like fire and theft and some perils that are normally excluded from ordinary homeowner policies, such as earthquake and flood. (Some insurers may make exceptions for catastrophic risks in some states.) Only terrorism, war, inherent vice, intentional damage and damage inflicted during repairs are usually excluded from fine-arts insurance policies sold by AIG, AXA SA, Chubb Corp., Hiscox Ltd., and Fireman's Fund Insurance Co., a division of Allianz SE, among others.

Fine-arts policies also often contain a provision for "loss of value" that occurs when a piece cannot be completely restored to pristine condition after a covered claim. If a $2 million painting is worth just $1.5 million after a tear in the canvas, the insurer pays for the repair plus the $500,000 difference in price. Some fine-arts policies also cover up to 150% of the insured value to allow for appreciation.

Because art insurers are on the hook for so many types of losses, the difficulty of restoring fragile contemporary art is of growing concern to them. "If you damage an oil painting, it is relatively easy to mix up some oil paint and make a repair that the eye cannot really see, but with the acrylic paints, you can match the surface color but you cannot get it to match the texture," said Charles Dupplin, head of the art and private-client division at Hiscox Group, a large European art insurer that recently started writing policies on the East Coast.

Another area where restoration has posed new problems is video and computer art. Whether or not a piece of installation art can be restored without diminishing its value often hinges on whether one element, such as a VCR, can be replaced with a newer component, such as a DVD player, without changing the artist's intent or the integrity of the work as a whole. At Christie's, for instance, a 1985 video installation by Bruce Nauman, "Good Boy, Bad Boy," uses two VCRs and two videotapes.

Payce Louis, chief underwriting officer at AXA Art, says a consensus has emerged among insurers that certain video and computer art cannot get the broad all-risk coverage traditionally given to fine-art collections. "You cannot insure video art like a Picasso," Mr. Louis said. "We have all decided the VCR is not a part of the art itself and can't increase in value. The DVD and VCR are just players and insurable for its replacement cost only."

In instances where artists are still living, sometimes the creator has been able to authorize restorations, or even has made them himself, as with Mr. Hirst's shark. But the issue becomes much more complicated and controversial when the artist has died.

For that reason, John Ippolito, professor of art at the University of Maine at Orono, suggests that buyers of contemporary installation and video art obtain a signed document from the artist spelling out his or her intentions with respect to restoration. "A questionnaire that creates a last will and testament of the artist is the only way we can decide whether a given component is essential to the re-creation of the work," he said.

Outside the world of fine art, some newly popular collectibles pose similar quandaries. For instance, Hollywood ephemera, including costumes, sets and props belonging to famous films and film stars, have been soaring in value recently. James Comisar, of Beverly Hills, Calif., owner of the largest archive of original television artifacts, has insured the Cowardly Lion costume from 1939's classic film, "The Wizard of Oz," for $1 million or more with AXA.

Dirt, perspiration and make-up stains can enhance the desirability and authenticity of costumes and props, doubling their price, Mr. Comisar said. But those very same stains can help destroy them eventually, he said.

"People love Marilyn Monroe's lipstick stain or fake studio blood and bullet holes in a John Wayne costume. It makes it a lot more personal and a lot more valuable," he said. "But if you come back as a collector and say the perspiration stain on Lily Munster's dress is now a giant hole and file a claim, they will say absolutely not. They don't insure for that type of deterioration." Mr. Comisar stores his items in a special temperature, humidity and light-controlled warehouse to prevent that kind of wear and tear.

Collectors who want to acquire avant-garde art and treasures should consult with experts on conservation and insurance in advance. Robert Manley, a senior vice president of Christie's New York, also recommends working with artists who have strong gallery representation because of the greater responsibility involved in taking care of installations and other unorthodox works. "For installations and technological things, they have to be one part scientist and one part media expert," he said.

Write to M.P. McQueen at mp.mcqueen@wsj.com1