The importance of provenance in mitigating risk in fine art deals

Authored by Natash Fekula, AXA XL Vice President and Claims Manager for Fine Art, Jewelry and Specie 

Managing risk, simply defined, is protecting the value of something. In fine arts, an object’s value is intrinsically tied to its authenticity. An authentic work by an esteemed artist can command millions of dollars, while a forgery of the same work, even if a casual observer couldn’t distinguish it from the original, might be nearly worthless. In art transactions, managing risk therefore necessarily involves determining authenticity, to the fullest extent possible.

Authenticity can come into play in sometimes unexpected ways in claims involving loss or damage to fine art. The value of a claim depends on whether the piece is insured on the basis of current market value or an agreed scheduled market value. In either case, an appraisal might raise questions about a work’s authenticity, of which the owner was previously unaware.

Art experts, collectors and dealers usually rely on several methods to determine authenticity, and an important one is provenance. Provenance is the history of a work’s ownership. Provenance matters because it can indicate the work was not stolen or forged and that its current owner can legally transfer ownership to another party.

Often, the value of an item increases depending on the identity of its owner. For example, an oak rocking chair fetched more than $450,000 at a 1996 auction because it belonged to President John F. Kennedy. The auction house had estimated the rocker’s value at $5,000, illustrating that provenance can boost values significantly. The art collection of philanthropists Peggy and David Rockefeller raised more than $835 million at a charitable auction in 2018, setting the record as the largest ever for a private collection and far exceeding pre-auction estimates.

Provenance and authenticity
Appropriate documentation showing provenance can help establish, but does not necessarily prove, authenticity. Even avid collectors have been duped, and the evolving nature of art scholarship has led to situations where a work is determined not to have been produced by a renowned master but by an apprentice, altering its value. For example, Rembrandt van Rijn was known to have taught more than 50 pupils, at least two of whom are believed to have painted works previously attributed to their teacher.

Determining provenance can be quite complicated and take years. Documents that support provenance include receipts, invoices, bills of sale, prior appraisals, inclusion in auction catalogs, and museum or art gallery exhibit catalogs. Provenance is a little easier to determine with contemporary art than with older works, as more records are likely to exist and will be easier to locate.

To avoid the risks of contested ownership, overpayments and disappointment, buyers of fine art should look for red flags, including:

• Missing information in the work itself. Artists in many different media typically attach their signature or inscribe their work, and sometimes labels, stamps, dates or other types of information can provide clues as to a work’s identity and provenance. When such clues are nonexistent, prospective buyers should proceed cautiously.
• Lack of documentation. Missing documentation may indicate a work has been stolen. Theft is a particular concern for buyers considering certain antiquities as well as European art from the Holocaust Era, 1933-1945. Many such works may have been looted from cultural sites or seized from private collectors. Laws and agreements such as the 1970 UNESCO Convention on the Mean of Prohibiting and Preventing the Illicit, Export and Transfer of Ownership of Cultural Property restrict the importation and sale of certain works. Reputable art dealers are well aware of and abide by these regulations.

For most art, gaps in their histories exist. The key is understanding the nature of such gaps and to look for plausible explanations.

• Unexplained gaps. Ideally, a work’s record of ownership is complete, but in fact, that is rare. For most art, gaps in their histories exist. The key is understanding the nature of such gaps and to look for plausible explanations. Gaps that cannot be explained may suggest that a work is forged or its history is fictitious. Or, for example, if a work is claimed to be from the 17th Century but the oldest records of its existence are from the 20th Century, the work might not be genuine.
• Absence from catalogues raisonnés. A catalogue raisonné is a scholarly compilation of an artist’s body of work. This can be a crucial starting point for research into a work’s provenance. The International Foundation for Art Research maintains electronic databases of catalogues raisonnés and offers various resources for collectors. When no such record exists, other research is necessary. Other avenues of provenance research can include an artist’s own inventory records, museum libraries, photographic archives and other institutional databases.

Determining authenticity is another matter, which resides in the domain of experts. Typically, authentication relies on three factors:

• Evidence of the work in literature, such as catalogues raisonnés and other institutional documents such as those of an artist’s foundation. Notably, foundations themselves ceased authenticating works about a decade ago due to liability concerns.
• Scientific analysis, such as X-rays and whether the medium and its elements are from the same period as when the work was purported to originate.
• Connoisseur analysis, or detailed review by experts with considerable familiarity of the artist’s work.

Sometimes, even when all three factors are combined, authenticity can remain in doubt. An ancient Greek statue acquired by the Getty Museum in 1984 is controversial because experts who viewed it believe it is a forgery. Initial scientific tests suggested the statue, known as a kouros, was an antiquity, but connoisseurs concluded it simply did not look like other kouroi from the same period.

A cautionary tale about provenance and authenticity emerged in 2011, when several collectors sued a longtime New York gallery, the Knoedler Gallery, accusing it of selling forged Abstract Impressionist paintings. A former director of the now-defunct gallery had acquired 40 paintings from a small art dealer who claimed the paintings belonged to a client who inherited them from his father. The paintings were undocumented, previously unknown works. Evidence came to light that the paintings were forgeries, made by a Chinese artist living in New York, who fled the country, as did two of the art dealer’s co-conspirators. A lesson from the Knoedler saga is that even experienced eyes can be fooled and ignoring red flags about a work’s provenance can be a costly mistake.

In one claim, the owner had replaced an element of a contemporary work without the artist’s knowledge or consent. Living artists may disavow their work in such situations, and in the above case, the creator of the piece did exactly that. Restoration without consulting the artist, and subsequent disavowal of the piece’s authenticity, can lead to lawsuits and complicate resolution of the underlying claim. That is another reason to seek specialized fine art coverage, which provides access to expert resources to preserve and protect the work’s value.

AXA Art has an extensive history of insuring fine art and a global team with deep expertise in underwriting and claims. We work with many different organizations in the art community, and we understand the risks in the art business. Please talk to us about how best to manage risks to protect your collection or art business.

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