Insuring Fine Art: The Visual Artists Rights Act and Its Bad Faith Implications

mona-lisaInsuring fine art can present challenges that are not encountered with other types of property. One of these challenges involves the application of the Visual Artists Rights Act of 1990 (17 U.S.C. §106A) (“VARA”) when artwork by a living artist is damaged.   VARA protects an artist’s “moral” rights in his/her work of art beyond traditional property law – in other words, even after a piece of art is sold, the artist retains certain rights to make sure that the artwork is not impermissibly modified.

VARA provides the author of a “work of visual art” the right to “prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right.” That right remains for the life of the artist.   Some states, such as California, have similar statutes (see, e.g. Cal. Civ. Code §987).

When a work of art by a living artist is damaged, VARA may come into play.   If the damage itself was intentional, then the person who damaged it may be liable under VARA. More important in the insurance context, however, is that the restoration of the piece can also implicate VARA.   The work very well may be able to be restored, but the restoration may itself be an impermissible “modification” if it is performed with “gross negligence.”   Though this has not been heavily litigated, at least one court has held that attempted repair without the artist’s permission states a claim for violation of VARA.   (Flack v. Friends of Queen Catherine, Inc., 139 F.Supp.2d 526 (S.D.N.Y. 2001).   Because of this, it is important that when restoring art by a still-living artist, the insurer make a good faith effort to get the artist to approve the restoration plan, if not perform the restoration him/herself.

VARA’s interaction with insurance has not been frequently litigated, and thus there is little legal guidance on an insurer’s potential liability under VARA, but there are several potential issues that could give rise to liability.   The first is an insurer’s direct liability to the artist if it undertakes restoration which violates VARA. The second is potential liability to the insured for breach of contract or bad faith.   If the artwork is restored without input from the artist, then it is possible that the artist can denounce the work in its entirety, rendering the piece virtually worthless. Although this issue has yet to be litigated, it is conceivable that this could lead to bad faith claims against the insurer.   Once again, in the case of damaged art by a living artist, we recommend that insurers consult not just with restoration experts, but with the artist him/herself, prior to restoration in order to avoid potential VARA and bad faith claims.

If you’re interested in learning more about this topic, and other issues related to insuring fine art, we are hosting a webinar on November 29, 2016. To sign up, go here.

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Avoiding Insurance Bad Faith
Cozen O’Connor represents insurance clients in jurisdictions throughout the U.S. against statutory and common law first- and third-party extracontractual claims for actual and consequential damages, penalties, punitive and exemplary damages, attorneys’ fees and costs, and coverage payments. Whether bad faith claims are addenda to a broader coverage matter or are central to the complaint, Cozen O’Connor attorneys know how to efficiently respond to extracontractual causes of action. More
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