Should Artists Be Expected to Pay the Gallery's Deductible?
February 23, 2016
From a reader...
Dear Ask Harriete,
A gallery I show with is asking all their artists to sign new contracts. Everything is standard (50-50 split, etc.) except for a new clause (shown below) which addresses the possibility of theft or damage.
"(Gallery) will ensure the artwork for its wholesale price. If a claim is filed, the insured work will be paid upon receiving the check from the insurance company less the deductible of $1,000."
Have you ever seen this in a gallery contract? Thanks for any thoughts you have. I'd like to know if you have ever run across this.
Signed, Shocked Artist
Dear Shocked Artist,
In my 35+ years of experience as an exhibiting artist and working in the arts and crafts community, I have never seen a gallery contract that requires the artist to pay the gallery's insurance deductible in case of loss or damage.
The simple impact of the clause is that the gallery is shifting a portion of their business expense onto the artists.
I realize that operating a business -- for both the artist and the gallery -- involves expenses. Insurance costs are increasing for everyone. There is no argument there. We all understand this too well.
I applaud the gallery for ensuring the craft/artwork against the risks of loss or damage. We can all understand that accidents do happen despite the best of efforts for care and security. Nevertheless, the gallery should be entirely responsible for the artwork while it is in their possession. The gallery negotiates their own insurance policy without any input from artists. Yet if the artwork is outside of the artist's control, why should the artist be held responsible for any portion of loss or damage?
An insurance "deductible" issue is a business decision between the gallery and the insurance company. A gallery can choose among several insurance options. Usually the higher the deductible the lower their insurance premium. Homeowner policies and car insurance policies work much the same way for individuals. Most of us have some understanding that a higher deductible means that small claims are not filed and small losses are not absorbed by the insurance company. This reduces the insurance premium.
In contract negotiations, the old saying is "everything is negotiable."
I would reject this clause by striking through the "... less the deductible of $1,000" clause and explain your position. If they don't agree to remove the clause, I would not agree to consign my work under these circumstances.
The Professional Guidelines Consignment Contract says….
“9. Insurance. Insurance for the full wholesale price should be provided by the gallery. The gallery is responsible for the deductible on their policy. Artist's should have control over any repairs, as necessary. (Again, for more information see the Claims for Damaged Work: Artist Checklist.) “
Two hypothetical examples illustrate the problem if the gallery shifts responsibility to the artist to pay the deductible:
1) What if the price of an item is less than $2,000 retail /$1,000 wholesale?
If the item is lost or damaged while at the gallery, the artist would receive nothing (zero $) when there is a $1,000 deductible. The gallery could even decide not to file an insurance claim, i.e. abdicating any responsibility for the loss or damage. In this scenario, there is little or no incentive for the gallery to handle items with care or secure items to avoid loss or damage.
2) What if the gallery chose to have a $2,000 deductible? or a $5,000 deductible? Where would this stop?
If the artists agree to pay the gallery's deductible, the gallery could keep raising their business deductible and further lower their premium expenses while the artists bear the increased risk of financial loss. A perverse incentive arises for the gallery to exercise less care and less security since the artists bear more of the financial consequences.
Conclusion: Maybe someone at the gallery thought that asking the artist to pay the $1,000 deductible would be a trivial amount of money in a low probability event -- but thinking through this situation as objectively as possible, I believe that this would create a seriously problematic precedent.
Harriete
This post was updated on December 11th, 2021.
RELATED POSTS and RESOURCES:
CLAIMS for DAMAGED WORK: Artist Checklist
Consignment Contract from the Professional Guidelines
Insurance Deductible Deducted from Whom?
Insurance Value, Wholesale Price, Retail Price For EXHIBITION CONTRACTS