Published on: 12 April 2019 by Michael Lamb
On April 2019 one would assume that buying an item from an auction held by one of the major houses – Sotheby’s or Christie’s for example – would be as good as buying it from the original artist or manufacturer. Unfortunately, according to recent news, this still isn’t the case.
A Philippe Dufour watch valued at HK$ 1,200,000 was recently listed in Sotheby’s April 2019 auction, that had been stolen from an individual in England at some point in the past 3 years. While the registration number on the watch was different, an investigation by the manufacturer confirmed that this was the watch that was stolen.
The original owner has since sued Sotheby’s Hong Kong and the parties responsible for consigning the watch to the auction house, and is awaiting the return of their property.
This is literally the worst-case nightmare for anyone buying something from an Auction. In this instance, the watch was pulled from the auction before it went under the hammer – but what if it had been sold? What would have happened if the original owner had only discovered that the watch was now under new private ownership? What would happen if the provenance of the watch had been discovered when the new owner, or his descendants, sell the watch in the future?
Many of your average home insurance policies in Hong Kong will, unfortunately, not include any protection against an issue like the one outlined above.
General home contents insurance plans in Hong Kong will usually only cover against theft, accidental loss and damage, or fire and allied perils. If you run up against a title issue, where someone claims that your property is actually theirs, then a majority of local home and contents insurance products would provide no protection.
For many people this isn’t going to be an issue. Ikea furniture and Stanley market knick-knacks aren’t going to need title protection.
But for the sort of person who will have attended (and purchased at) the April Sotheby’s auction, or the Contemporary Art Show, or even someone who may be going to the Affordable Art Fair, this could be a far more realistic concern that may be thought.
Who actually considered a provenance risk at one of Hong Kong’s biggest auctions?!
Unfortunately, fabrications, forgeries, stolen property, and war seizures are far more common than you’d think. There are conmen who have, for example, replicated legendary wines and successfully passed these forgeries off in auction. Wine, while being a consumable investment, can also be held for years if not decades after it is purchased. It is also not uncommon for investment wine to be resold… and voila you have a provenance claim.
Title insurance is most commonly found in high end home assets policies, gallery and museum insurance, and (at least in the USA) home sales.
Simply put, should you be dispossessed by law of an item due to unforeseen discovery of the vendor’s title being defective or not existing, or any financial incumbrance on the item prior to the purchase, then most title insurance benefits in Home Insurance will provide restitution for the item in the form of the initial purchase price.
The insurance will also normally offer financial coverage for any legal costs you may encounter as part of your dispossession.
Coupled with another benefit commonly found on Home Insurance plans catering to high net-worth individuals, New Acquisition cover, protection against a defective title can be invaluable to collectors who have amassed significant collections – whatever the nature of that collection may be.
You may not collect watches, or wine, but the risk of a defective title exists for collectors of all types across the world. Maybe you collect stamps, comic books, classic cars, Magic The Gathering cards, or just like collecting art.
Anything that is collected, and which is sold on a secondary market carries the risk of having a defective title. Each link we provided above is a new story in relation to fraud for these various collections. In the art world, for example, much of the art that was looted by the Nazis in World War 2 has still not been recovered.
Should one of these stolen artworks ever come under the auctioneer’s hammer (perhaps a great, great, great grandchild stumbles upon this work and decides to sell it), would anyone know at the time that it was originally stolen? In our very first example with the watch in the Hong Kong Sotheby’s Auction, the rightful owner managed, through some stroke of providence, to identify and stop the sale of his property before it was sold.
But as we said before. What if that hadn’t happened? What if you had purchased that watch? Or a stolen comic book? Or sold to someone else a “rare” stamp that was actually a forgery?
Even, as proven with the Sotheby’s incident, going through a reputable and expert auction house is no guarantee that you will be avoiding the complications of a defective title. What happens if you inherited the item, and someone claims that this family heirloom is actually theirs and can prove the fact?
At CCW Global we know that when it comes to collections, our customers are extremely passionate about ensuring that theirs are protected no matter what. From questionable provenance, to the value of a piece inflating due to the death of the artist, we understand that your collection requires flexible and sophisticated coverage solutions.
If you would like to investigate your various exposures for a collection or home insurance policy, or if you would like to receive a free quotation, please Contact Us and speak to an expert broker today.