Insurance for Ship Models
Reprint from the Nautical Research Guild
The topic of insurance for ship models seems to resound in club meetings periodically, especially when there is the anticipation of a club exhibit. The insurance question is very complex, and this report does not claim to cover all the potential issues involved in insuring a model, however, hopefully this report will stimulate thinking about most of the things that need to be addressed. Some model builders do not desire to insure their models, and that is fine and their choice.
First, and above all, do not assume that a model is covered by insurance because you have a policy such as homeowner coverage, or because an exhibit host states that there is insurance on the models. Ask as many questions you can possibly think of about the insurance. This article will hopefully start that thinking process.
This is a very large issue about which very little will be said here. The true current value of a model is the amount a certified/licensed appraiser places on it. Do not assume that a similar model which sold for $20,000 built by Mr. Joe Professional with a national reputation, makes your model worth an equal amount. Your model might have even higher quality, but you also have to have a documented record for your reputation. Also, do not assume that a model's value is the sum of the cost of the parts (kit or scratch) plus the number of hours you spent times a "reasonable" rate. Even minimum wage does not enter the picture. Expect to be disappointed. Build the model for enjoyment of the task and the subsequent viewing, and place the given insurance value on it.
A typical insurance company will provide a rider or a separate policy to cover collectibles. There might be a blanket coverage of $10,000 ($75 per year). This covers unscheduled items up to a value of $2,000 each. The coverage is only for listed perils such as wind and water from a storm, earthquake, fire and vandals. There is a deductible such as $100 on each claim. If you bump the model and it crashes it is not covered. The coverage is for anywhere in your possession; home, office, exhibit. There is a question on whether there is coverage if the model is being transported to an exhibit by a friend in his van and there is an accident. Ask your insurance company.
Models over $2,000 value in this example must be listed separately. Under this condition breakage, which was not covered above, is covered. If the total value exceeds the $10,000 then additional insurance is necessary for an additional fee. There is also a standard deductible for this coverage.
R. Michael Wall of the American Marine Model Gallery in Salem, Massachusetts, states in an e-mail:
"[For a] homeowner's coverage [policy]; a value is usually developed by the homeowner in agreement with the insurance company. During this process a cap value is derived, and pending the appropriate homeowner coverage's for normal perils (fire, theft, vandalism), each item so specified would be covered under that cap value. I would estimate that models specified having a value of $1,000-$3,000 is probably the maximum amount a general homeowner insurance company would provide for such an itemized object."
He goes on to state:
"A Fine Art Policy (stand alone/independent policy) is the normal insurance instrument which can insure particular objects for the homeowner. These are generally separate policies which are or can be amendments to the homeowner coverage. They would normally call for a formal appraisal of the model, and expand the peril types of coverage (models in transit or out of the care/custody of the homeowner). Under this type of insurance coverage, the homeowner can obviously (based on appraisal) specify the exact amount of coverage desired for a model. Another option in this realm is known as "agreed amount" coverage, which could insure a model, for example, beyond an appraised value, i.e. appraised value of $10,000 yet due to sentimental attachment the homeowner feels its value is $20,000 - the insurance company would provide coverage for that itemized piece at the $20,000 level, and this value/coverage would be reflected in the premium. Under this circumstance, should the model be lost, the insurance company would pay the full cash value."
Under both types of coverage above there must be an appraisal by a certified/licensed appraiser which the insurance company will accept. The appraisal usually does not have to be submitted to the insurance company for the blanket coverage. It is submitted at the time a claim is made for loss or damage. For the higher value models over $2,000 the appraisal is required at the time of application for the insurance. Usually the appraisal consists of a detailed description of the model with photos included for additional proof. Check with the insurance company prior to having the appraisal done about their requirements for the content. Expect a good appraisal to be expensive, but avoid appraisers who charge a percentage of the value of the model. This is not proper.
There are two ways to go for coverage at exhibits. Use your own insurance as described above, making sure your company will cover all the risks you desire. Do this in advance to be sure you have the coverage. Some companies will not insure collectibles in an "open to the public" location.
The second is to obtain coverage specifically for the exhibit. This may not be easy to accomplish, or the cost might be prohibitive. In some cases the "host" of the exhibit; bank, office building, conference, etc., will claim to have insurance. All you need to do is provide them with a value (even if it is guessed at by the owner). They probably will not ask if there is an appraisal. This sounds too good to be true, and probably is. Do not accept on faith the assurance of the host that there is coverage. They are not being dishonest, but really do not understand the type of coverage required. Challenge with questions and a trial claim to the insurance company providing the host with the insurance. This should be done well in advance of the exhibit, and since you will probably be surprised with the response, be prepared to look for insurance elsewhere.
For a group exhibit an insurance company must be found that will provide the desired coverage, and it must be absolutely clear what is required to process a claim (appraisal, proof of loss, etc.).
Some insurance companies reserve the right to have a model repaired, and usually by someone other than the builder. The owner receives no cash for the model. This negates the ability to claim the model was built by "me". This also negates the possibility of entering the model in a contest, as the builder should/must certify he/she is the only one to have worked on the model. Also, in a complete loss the insurance company can choose to replace the model with a like kind. Again, the owner can not claim building the model, and refusal could mean no cash either. These questions must be cleared up at time of contracting for the insurance. Additional premiums might be required to get it the way the owner wants.
In Transit Insurance:
As stated above, be sure that you have insurance coverage any time you transport your model. Another concern is to check with the moving company when you are moving your household to a new location. Without the proper insurance in this case you will probably be left with next to nothing in compensation if the model is damaged or lost. The insurance provided by the movers might cover repair, but in the case of total loss the company probably has the right to replace the model with a similar model, or they might pay a minimum amount base upon the weight of the item (i.e.. $1.00 per pound). Dana McCalip states that he has heard of one case where "All the moving company (who said the models were covered) wanted to do was to furnish the owner materials to build another model."
Forget all of the above for an exhibit and take the risk. This is probably not wise but it is highly unlikely there will be theft, vandalism, or breakage. The risk is fire, flood, earthquake, and other natural disasters. However, be sure that all club members are aware of this. Coverage at home is essential for valued models.
The Golden Rules:
At exhibits place all models in cases which are large enough to require some effort to move.
Have club monitors in the exhibit room during the open hours if at all possible.
Always test the insurance company with a mock claim to see what is needed.
PROTECTING YOUR SHIP MODEL CONSIGNMENTS:
This letter by Dana McCalip appeared in the "Nautical Research Journal", Volume 35, Number 3, pages 163-164, September 1990, and is reprinted here due to its applicability to protecting ship models.
This commentary really should not have needed to be written! However, a recent discussion with Jeffrey Phillips, Editor of Model ship Builder magazine made it all too clear that something had to be said.
Jeff and I were discussing the sale of ship models and it came to light that during the past several months some of his readership had contacted him to say that they had been "ripped off" by some antiques or art gallery dealers who had not paid off on models placed with them. In most instances it involved models left on consignment and had subsequently been sold. Promises had been made and nothing of substance ever materialized
This brought to mind another incident that occurred during the early 1980's at a very large hobby shop specializing in ship model kits and nautical artifacts in Chicago's North Shore area. The shop, because of its special interest in ship models, always had on display many finished models built by members of a local ship model society. Some were offered for sale on consignment while others were there on a display only basis.
To sum up the story, business was not what it should have been and the shop was forced into involuntary bankruptcy by its many creditors. At the time of the bankruptcy filing, the "on hand" inventory was seized by the court and held for liquidation by the various creditors. "On hand" inventory was considered to be "all goods on the premises!" This included everything: models on display or on consignment!
A seemingly unfair and unjust situation indeed but absolutely legal!
You see, the consignors of the models or exhibitors never bothered to perfect a security interest in their property before it entered upon the dealer's premises. Merely having an exhibit or consignment agreement is not enough! Although these agreements span differences between buyer and seller, and/or exhibitor and exhibited, they do not protect your interest or property rights where other creditors with perfected security rights and filings are concerned. To be protected you must initiate a filing under the auspices of the Uniform Commercial code (UCC.)
The UCC is an institution, subscribed to by all States (except Louisiana) and provides for the official registering or placing on notice with the general public that a security interest against specific goods and property is held by a specific individual at a specific location. In essence it serves as a bona fide notice to creditors as to "who owns what." Filing and perfecting a security interest in goods and property can only be done prior to the goods being placed of the premises of the person or business. It cannot be done "after the fact!" This is because once the goods pass through the portals of the dealer or gallery, they come under the protective umbrella of any of his other perfected or secured creditors.
Filings are made on special UCC forms at the UCC Division of the Secretary of State's Office and/or (it varies from state to state) the County Recorder's Office. In the majority of states it is the Secretary of States Office only. In Louisiana the filings are made via chattel mortgage at the county or parish level.
Remember, a consignment or exhibitor's agreement will fully protect your property from seizure by a fully recorded and perfected creditor only if you are fully perfected with your own security interest at the time the goods are placed on the dealer's premises.
UCC forms are available at any good office supply store and are simple to prepare. If you have any questions about the advisability of filing a security interest in your property, consult the UCC Division at your Secretary of State's office or your local County Recorder of Deeds.
Naturally, a UCC filing cannot protect you from an unscrupulous dealer who runs off with the model or the money.
Pick you model brokers or dealers carefully!
R. Michael Wall, American Marine Model Gallery, Salem, MA
Sara Conklin, certified appraiser, speaker at the 1996 West Coast Ship Model Conference and Exhibit on Queen Mary, and subsequent article in the Proceedings.
Copyright (c)1997, Eugene L. Larson for the Nautical Research Guild