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Probing provenance: The importance of due diligence and insurance for defective title

The recent, widely publicised dispute over the provenance of two paintings by Egon Schiele, withdrawn last year from a loan exhibition at New York’s Museum of Modern Art on the grounds of contested ownership, offered a vivid illustration of the problems facing museums and private collectors who may find themselves having to prove good title to their possessions

During the war, the Nazis looted, confiscated and destroyed countless possessions. Amongst these items were numerous paintings, worth millions of dollars in today’s market. How could some of these paintings years later be hanging on the walls of public and private museums? The story is never straightforward.

Among those responsible for confiscating works of art were some very shrewd individuals. Lives were traded for paintings, the Rothschild family has long been claiming that certain paintings no longer in their possession once hung on the walls of their villas. Paintings went underground and entered the stock of unscrupulous dealers eager to make a quick buck whilst currying favour with the Nazis. Wealthy overseas collectors, looking for a good deal, bought in abundance from anyone desperate to get hold of some hard currency, quickly. Some of the finest collections were built up during these years of turmoil and are now hanging on both private and public walls.

Recent media coverage of the Egon Schiele case in New York has caught the attention of all in the art world, including those of us in the art insurance market. The case centres on two paintings, on loan from the State-owned Leopold Museum in Austria, which were seized by the New York district attorney from an exhibition at New York’s Museum of Modern Art (MoMA) in response to claims by two families to rightful ownership of the paintings. MoMA successfully opposed the subpoena in court (The Art Newspaper, No.82, June 1998, p.5), arguing that it violated the New York statute that prevents any kind of seizure of art loaned into the State. Nevertheless, the event is bound to have serious repercussions around the world for anyone seeking restitution of their art, and not least for those who have collections of art, either public or private.

The families claim that the Nazis confiscated the paintings from their relatives. Under US common law, good title of a stolen object never passes from the thief, regardless of how many hands it may pass through. Cases are increasingly being decided on how diligent the purchaser has been in tracing the provenance, even if the person now in possession of the painting wishes to bar the claim as too late under the statute of limitations (usually six years). In other words, the onus has moved almost entirely onto the purchaser to do the research into the provenance of an object. Certainly all the major museums have long had policies of carefully checking new acquisitions. This has gone some way to minimise their exposure. Private collectors, however, remain at risk as they do not often have the resources, or until now the inclination, to seriously vet the provenance of any new purchases.

As we have seen with the Nazi gold issue, this is an understandably emotive subject. The number of heavy-weight organisations involved in tackling this issue, such as the World Jewish Congress’s Commission for Art Recovery, the Holocaust Art Restitution Project and the Association of Art Museums Directors, to name but a few, demonstrates the commitment behind finding a solution. However, motives are not always 100% altruistic. Charles Schumer, an aspirant for higher office in New York, which has a crucial voting block of Jewish constituents, outlined a bill at the Schiele hearing which would provide funding for Jewish organisations that help families trace war loot. The motivations are easily interpreted.

What the museums most fear, in the light of the district attorney’s subpoena, is that any future exhibition loans from overseas could be threatened, lenders being deterred from offering works for exhibition in the US. This would be devastating for the museums’ income, not to mention a terrible loss for the public. In this increasingly litigious world, legal fees and the possibility of losing valuable works of art from a collection could be ruinous to museums and collectors alike.

How can they guard against such claims? Most important is their policy of due diligence. If they have thoroughly researched the provenance of every painting they have purchased since the World War II, and engaged the services of such organisations as the Art Loss Register, they have lessened the risk. In the US, museums’ collections are catalogued and open to inspection. On the one hand, this makes their operations more transparent, which is always looked upon favourably by the courts. On the other hand, it could also make them more susceptible to claims than say a private collector; after all, how many people traipse through the rooms of the private collector on Park Avenue, wondering where all these fantastic paintings could have come from?

Does this process of due diligence give the collector sufficient peace of mind? Are the floodgates of litigation about to open, leading to lengthy and costly battles in the courts with the possibility of losing the work at the end? In the past, insurance has offered little in the form of protection against this type of loss. Now, however, specialist art insurers Hiscox offers not just the standard “all risks” policy that is widely available in the insurance market, but also policies that reimburse collectors if ownership of any work is disputed.

The policy is in two sections. The first covers the defence and claimant’s costs arising out of the alleged defective title of an insured work of art. The second covers the agreed value of an insured work of art if good title has not been established once the legal process has been exhausted. The intention of the policy is to protect clients once they have researched the provenance: it is not intended as a substitute for that duty. Why should those who have been buying art in good faith using good practice not be able to seek compensation for their loss?

Originally appeared in The Art Newspaper as 'Probing provenance'