By Renee Montgomery While seemingly mundane and innocuous, insurance certificates require oversight and attention. Insurance certificates are exchanged for loans as confirmation that insurance is indeed in effect. They’re not a legal agreement, though, so it’s important that the loan contract itself include language that the borrower is responsible to insure, as well as cite all conditions of insurance. However, because it’s easier for a museum to sort out insurance details in advance during COI stage rather than sue and recover from another institution afterwards for breach of contract, COIs should be closely examined. COIs can bring to the surface aspects of the borrower’s insurance that may require a change or resolution, for instance if policy exclusions differ from those stated on the loan contract, if transits or off-site locations are not in fact covered as thought, or even if the insurance is about to expire.

Some museums are provided with a COI template by their agency so they can distribute the document themselves to lenders, while other museums must ask their broker to provide certificates directly to lenders. In the latter instance, occasionally brokers are not informed of lenders’ special terms before making out the COIs. COIs should match any special contractual obligations your lenders may have.

When receiving a COI from a borrower, review it carefully to ensure the following is accurate: the list of works, dates of the loan, time period (should be wall-wall if both transits to and from your institution will be covered), values (in agreed currency), and your museum’s name as lender. The COI should cite your museum and its directors, officers, trustees, employees, and agents as additionally assured and/or waive subrogation rights against these parties. This prevents the borrower’s insurance company from settling a claim and then coming back and suing your institution to recoup its losses, for instance if the underwriters believe your packing was at fault. The oft-seen wording “Certificate issued to ABC Museum” is insufficient. For museums receiving insurance certificates for general liability from contractors, special events, etc., the COI should also indicate the required limits of coverage.

Some museums also ask to be named as “loss payee” which should also be reflected on the form, giving the owner the right to deal directly with the insurance company, among other privileges. Of course before granting the “additionally assured,” “waiver of subrogation,” or “loss payee” language to lenders, your museum, as the insurer, should consult with your broker first, especially with respect to commercial packers, forwarders, or shippers (e.g., airlines).

Other areas to watch:

Is the insurance actually wall-wall as generically stated on the form? Or might the museum only be insuring a segment of the journey, for instance, if the loan is coming to you via another museum’s exhibition? Have some of the standard exclusions been waived as a special exception or “bought back” from the insurance company? If so, be sure to delete these as exclusions on the form. The point here is that the generic language that comes on the COI templates does not necessarily suit every circumstance and may need some customization per your agreement with the lender. Of course departures from the generic form conditions must be approved by the insurance agency, not the museum. In my experience, fine arts insurers will permit additional wording to be added to suit a lender’s demands as long as it conforms to the general policy conditions, for example when lenders wish to see specific coverage mentioned on the form in relation to their particular loan (e.g., “the ABC Museum is covered against loss or damage due to earthquake or storm damage”). Amending COIs in this manner can be a viable alternative when a lender is requesting their own endorsement under your policy, which is a lot more complicated.

COIs should be received at least two weeks before the insurance is to take effect in order to allow sufficient time to work out any issues. If the insurance is wall-wall, this means two weeks before an object off is taken off display or out of the storeroom for preparation for an outgoing loan. The COI should be kept updated with any policy renewals. Tickle these dates to make sure the borrower follows up. The same goes for situations with a tour where the insurance changes from venue to venue – it’s important to be clear about who is insuring an outgoing loan at each phase of a tour and receive documentation. The COIs should dovetail without gaps for such a tour with successive venues insuring the object. For very busy museums with a lot of outgoing loans, it’s recommended that outgoing items with the highest values receive the closest scrutiny.

In general, if you don’t understand the certificate language, ask. Finally, be sure the lender and/or their agency has your name as the COI contact, as COIs received in the mail without contact information tend to float around the museum. Copies of COIs that you issue should be also forwarded to your broker, who can be helpful in tracking aggregate values on location at the same time.

Submitted by Guest Blogger, Renee Montgomery, Assistant Director, Insurance and Risk Management, LACMA