MUSICAL INSTRUMENTS

A Fine Art Underwriting Primer

Prepared by IMUA’s Arts & Records Committee

Copyright 2015 Inland Marine Underwriters Association

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The Inland Marine Underwriters Association [IMUA] is a not-for-profit national trade association primarily focused on the

commercial inland marine line of business. IMUA was organized in 1930 as a national trade association and rating bureau for all

inland marine classes. In 1948, the rating bureau activities of the IMUA were transferred to the Inland Marine Insurance Bureau

(now defunct) due to the 1944 US Supreme Court decision in the South-Eastern Underwriters Association case.

Today, IMUA is comprised of --

Members - insurance and reinsurance companies that underwrite a significant portion of the commercial inland marine insurance in the U.S.

Associate Members – companies or organizations that provide products and/or services to the insurance industry.

IMUA is committed to advancing the educational, governmental, regulatory and technical interests of the commercial inland

marine insurance industry.

One of the services IMUA provides its members is the publishing of information for use by underwriters, loss control and claims

specialists, and other interested parties. The topics covered by IMUA Reports, Bulletins and News Articles are intended to

provide an overall awareness of the issues, hazards and exposures associated with a specific industry or inland marine class of

business.

Volunteer members of a technical committee of the IMUA or IMUA staff have produced this information. Committee members

abide by antitrust restrictions while compiling information.

It is generally not possible to treat any one subject in an exhaustive manner, nor is it IMUA’s intent to do so. No warranties are

made regarding the thoroughness or accuracy of the report or any part of it. Nothing in this report should be interpreted as

providing definitive guidance on any question relating to policy interpretation, underwriting practice, or any other issues in

insurance coverage.

IMUA does not prescribe to its members how to make underwriting or claims decisions, nor does it require that analysis follow

any particular format.

IMUA offers thanks and appreciation to Anna Belk and the Arts & Records Committee members for their contribution to this report:

Jennifer Schipf (Committee Chair) – XL Catlin

Amelia Brankov - Frankfurt Kurnit Klein & Selz

Claire Brown –Winston Art Group

Paul Fritsch – ACE Group

Andrew Gristina, Navigators

David Hall, Wiggin and Dana LLP

Simon Hornby, Crozier Fine Arts

Thomas Kline, Andrews Kurth

Roseann Kreischer, XL Catlin

Melissa Lalka – Chubb Group

Khem Lewis, XL Catlin

Christopher Marinello, Art Recovery International

Shelia O’Keeffe – Gen Re

Julian Radcliffe – Art Loss Register

Casey Santangelo – Travelers

Linda Selvin – Appraisers Association of America

Dorit Straus – Independent Consultant

Victor Wiener – Independent Appraiser

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The Market & Valuation

Musical instruments make up a unique segment of the fine art market and therefore it is important for

inland marine underwriters to understand the complexities of their fragile nature and use in order to

provide proper coverage. Today, dealers and auction houses all over the world participate in the rare

musical instrument market. Corporations, governments, and individuals acquire instruments for many

reasons: the preservation of art, to provide instruments to younger artists who cannot afford them,

investment returns, or a combination of all of these objectives. Throughout history, high valued musical

instruments have always been owned by wealthy individuals. In earlier centuries only the nobility had

the resources to own renowned instruments. Today, they are easily owned by a variety of people

ranging from passionate collectors, professional musicians, and even high school students who each

need coverage to protect their instruments.

Generally, the “star factor” or provenance of an instrument adds an allure and can raise prices, but as

with art, the majority of the musical instrument market tends to be stable. There are exceptions, such

as “Elvis’s guitar,” “Liberace’s piano,” and rare 17th and 18th Century Italian stringed instruments that

have set auction records and made headlines due to their high prices. Good violinists may keep the

instrument(s) for a long time which also adds to the value. For example, high prices were paid for

instruments once owned by the violinist, Isaac Stern or the great cellist, Mstislav Rostropovich. Other

than the provenance and history of an instrument, maintenance, condition, and the quality of the inner

mechanisms all contribute to the value of the instrument. The 19th century virtuoso Niccolo Paganini’s

Guarnerius violin, nicknamed the “Cannon” for its powerful sound, is insured for several million dollars

and is accompanied by an armed guard when it leaves its permanent home in a museum in Genoa.

The Stradivarius and del Gesu instruments command high collectible prices, ranging anywhere from a

million for an unexceptional violin to twenty million for a fine Stradivarius cello. Generally, the most

expensive instruments are the Stradivarius violins of which roughly 600 violins, violas, and cellos are still

in existence.1 The Stradivarius has become an investment and at times the owner will lend the

instrument to a celebrity soloist to play for an event. 2 Rare instrument prices benefit from a relatively

stable market, high but not excessive individual values, and an excess of demand over supply among

players and collectors. Although eye popping prices are paid for pristine instruments there are also

many instruments in very active use. At lower values, bows are also in high demand and can command

prices as high as $450,000 with notable provenance.

Many components go into the valuation of a musical instrument since each instrument is unique. 3

Values are derived from the provenance, the condition and quality of the instrument. The condition of

1 The Art Loss Register, Musical Instruments database information, 3 March 2014. 2 Alberghini, Paolo. Interview, 4 April 2014. 3 Alberghini, Paolo. Interview, 4 April 2014.

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the back of an instrument is the most important. Cracks compromising the back will greatly devalue the

instrument.

Experts

There are very few independent appraisers for musical instruments outside of the dealers. Most pre-

sale valuations are given by dealers who have no financial interest in the sale of the item to separate

conflict of interests. It is typically to use a bill of sale for establishing. If the instrument sells, the buyer

should get an independent appraisal from an outside source instead of only relying on the dealer selling

the piece. There is not one expert who knows all instruments. The musical instrument market is a small

niche and dealers tend to specialize on a limited number of makers that they know them exceptionally

well. In some cases, when authenticity may be questionable specialists may use expensive technology

like dendrochronology, the science of dating events in former periods by comparative study of growth

rings in trees and aged wood,4 to determine the age of the wood and other times will ask a scientist to

confirm dates. Obtaining a certificate of authenticity can be expensive and takes time as well as

expertise to establish. Overall, the musical instrument trade is gaining more knowledge and it is much

harder to make a mistake about an instrument.5

Type of Policies

Policies for musical instruments vary based on the needs and the activities of the owner of the

instrument. The insured of a musical instrument policy can be individuals, non-professional using the

instrument(s) for personal use, a professional individual, a professional musical instrument program, a

student musical instrument program, a professional group/association, an orchestra, or a musical

instrument dealer.

Individuals who are not professional musicians, who wish to insure their instruments and prefer to

separately schedule the instrument rather than consider it as contents, can request an endorsement to

add the instrument to their home owner policy. Almost any instrument including pianos, stringed

instruments, brass, percussion, and various types of guitars can be scheduled on the policy. The values

for these instruments tend to be low and the transit exposure minimal. Individuals who are professional

musicians and have a more significant travel exposure, will not qualify for these types of endorsements,

but will secure coverage from a specialty broker and insurance carrier. In particular, well known

performers such as violinists with high valued instruments will fall under this group, as well as other

stringed instruments that are of high value.

Professional and student musical instrument program policies provide coverage for a group of

individuals participating under one company or institution. Individuals who are professional musicians

but who have instruments of not particularly high value can purchase coverage under a group policy for

4 Marriam Webster Dictionary, 3 December 2014. 5 Alberghini, Paolo. Interview, 4 April 2014.

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their particular instrument, such as violin, viola, harp, flute, brass, percussion, or electric guitar. Student

music programs provide instruments for rent and coverage is provided through rental houses.

Professional orchestras will purchase coverage on behalf of all the members of the orchestra, including

retired members. Coverage will be for all the instruments used by the musicians in the course of their

employment, sheet music, and the music library of the orchestra as well as any additional instruments

that the musician may have at home not related to their professional work in the orchestra. Chamber

Music and smaller ensembles are similar to orchestras but have a smaller number of individuals within

the group.

Similar to fine art dealer policies, a musical instrument dealer policy is usually bought by musical

instrument makers, repair shops, and dealers who require a policy specific for their needs. This includes

covering owned and non-owned instruments at the premises, off their premises, and in transit.

Instrument dealers engage in a collaborative business and it is not unusual for colleagues in the business

to co-broker sales. A musical instrument dealer will frequently take on consignment instruments

belonging to others who “entrust” it to them. In turn they may either keep it on their premises or allow

it to leave the premise with customers who are trying it out prior to purchase. It is not unusual to fly an

instrument internationally so that the buyer may play the instrument before purchasing. Due to the

higher risk involved in a consignment, specific insurance is bought while the item is on consignment or

travels so that dealers are at a low risk.6

Common Policy Coverage and Exclusions

There are a few specialist brokers in the musical instrument business. One experienced broker from

Heritage, Ellis Hershman, gave an explanation of typical coverage’s and exclusions seen on a musical

instrument policy:

“Musical instruments are generally insured on an agreed value basis. However, there is an

exception for a dealer valuation clause that is similar to what you find for a fine art dealer.

Common exclusions include wear and tear, criminal acts, loss of use, inventory shortage, and

repair. Other exclusions for dealers sometimes include denting, marring or scratching. Musical

instrument collectors are nearly identical to art collectors.”7

In addition to the standard musical private collector or dealer, there are unique policies for covering

rental programs whether for high school students or professional musicians. Hershman explained how

to underwrite this type of program,

“I write one dealer who has a rental program and they rent to professional musicians only. They

have special cases for each instrument to help protect them. The rental program is similar to

6 Alberghini, Paolo. Interview, 4 April 2014. 7 Hershman, Ellis. Heritage Insurance Services. Personal Interview. 13 December 2014.

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writing a packer/shipper, customer all-risk policy and rates are used for weekly, monthly and

yearly rentals. Student rental programs are even rarer. The exclusions are more of the dealer

variety because the instruments move frequently and it is done on scheduled values.”8

Transit

Similar to fine art high values and fragile nature, musical instruments need to be securely packed and

carefully monitored when in transit. It is preferred that musicians accompany their instrument when

traveling to concerts. Most small to medium sized instruments such as violins and violas can be brought

on board as standard carry-ons. For larger instruments, such as the cello or bass, an airline will allow an

additional fee or purchase of an additional ticket for the instrument to travel on board. Due to changes

in airline regulation, musicians need to check airline policies before travel arrangements are made. 9

Hershman advised, “Generally musicians will travel with their instruments and not allow them to be

stored under the plane. They can buy an additional seat for the instrument. There are a lot of flight

travel cases made by companies that will protect an instrument from damage.”10 A well-known musical

instrument case maker is David Gage who has a patent on the Upright Bass Case. The superior cases are

typically custom-made and built with modern technology to protect the instrument.

Restoration

Due to the sensitive nature of an instrument, most are damaged at some point or another and repairs

are frequent. Unlike fine art or other collectibles, a lot of instruments are designed to break along

certain stress points and are more easily repaired.

Storage

Appropriate storage of musical instruments when not in extended use follows similar principles adopted

for fine and decorative art; maintain a stable temperature and relative humidity. Severe exposure to

cold or heat or a very quick change in climate is likely to have an adverse effect on the instrument

causing it to crack, warp, corrode or tarnish depending on materials used in fabrication. For strings and

woodwind, the range of 70°F +/- 5° and RH 50% +/- 5% is appropriate. Instruments with metallic

elements or made from one of more metals ideally require a lower temperature and an even lower RH,

as far down as 35%, to prevent corrosion and tarnishing for extended storage.

Prior to extended storage it is preferable to disassemble the instrument, relax strings while maintaining

some tension, remove reeds, mouthpieces, mutes, straps and clean all parts before storing in the

instrument’s carrying case. There is specialized music furniture available for both short and long term

storage providing lockable units or lockers to accommodate all types of instruments plus mobile racks.

8 Hershman, Ellis. Heritage Insurance Services. Personal Interview. 13 December 2014. 9 Lambson, Liz, Safe Travels: 8 Tips for Transporting Musical Instruments, p.2, 11 June 2014. 10 Hershman, Ellis. Heritage Insurance Services. Personal Interview. 13 December 2014.

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Handling of historic instruments follows some basic principles; wear cotton or nitrile gloves when

handling the instruments to protect from salts and oils which are naturally present on hands and can

cause corrosion. Instruments that have been repaired may have inherent weaknesses, for example, a

brass instrument may have been soldered, and require special care.11

Pianos

Pianos are another type of musical instrument that have a long history before it developed into the well-

known instrument of today. Prior to the invention of the piano, the clavichord and the harpsichord were

the most prevalent instruments used either in the home or small concerts. Eventually these two

instruments were developed into what is known as the modern piano, which is a set of keys connected

to an inner hammer that hits strings to make a sound. The invention of the piano allowed the ability to

make sounds in a repeated fashion over and over again. With time the piano was enlarged to create a

larger sound and volume. The number of octaves was increased from the earlier days by heavier strings

adding tension to the frame. The entire piano structure became stronger and heavier.

Pianos range from the seven-foot Concert Grand Piano to several other sizes of grand pianos, and

upright pianos, which were the most popular for home use. Pianos became so popular that there were

hundreds of manufacturers in Europe and the United States. Today, most of the piano manufacturing

companies are no longer in business and there are far fewer piano makers in Europe and the US. With

the interest in classical music in Asia, there are several makers that manufacture pianos in Japan, China

and Korea.

The most famous pianos are made by Steinway, Mason & Hamlin, Fazioli, Bosendorfer, and Yamaha.

Baldwin and Bechstein pianos are no longer manufactured, but many pianos are available through

private or dealer sales. A Steinway Grand in good condition can retail from the low $30,000’s to a high of

$100,000. Fazioli and Bosendorger’s are also extremely high valued pianos. The condition of the inner

workings of the piano such as the strings on pins, hammer actions, alignment, and sound board brackets

all effect the total value of the instrument.

Sheet music and Scores

Musicians, regardless of instrument or genre of playing, professionals or non-professionals, utilize sheet

music and scores as part of their practice. Some music is hand written by the composer particularly

when the demand for that work is small. Sheet music and scores are purchased through small but

diminishing music stores and music publishers. As such, costs for sheet music has risen considerably

even for works that are no longer protected by copyright. For example, a recent purchase of Peter’s

edition of Beethoven complete piano sonatas in hard cover could exceed seventy-five dollars per

volume. Soft cover costs are lower, but could also cost upwards of forty-five dollars for each volume.

11 Simon Hornby, Crozier Fine Arts, 27 October 2014.

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Today, with new technology, many works are available on-line and many musicians will download works

directly from the internet. There are also computerized music stands where music can be downloaded

directly to an IPad or similar device and used directly for performance. It is also now possible to make

notations similar to the way musicians make notations on sheet music printed on paper.

There are numerous music libraries on-line particularly for works whose copyright has expired.

Professional orchestras and major music conservatories maintain extensive libraries of sheet music and

full scores for every instrument and every work in their repertoire. In the event of a loss to the sheet

music, the orchestras would incur huge costs to replace their libraries. Major orchestras should consider

purchasing a separate limit for their musical library in addition to purchasing musical instrument

coverage for their owned instruments. Sheet music is not only stored on premises but travels with the

orchestra for their tours. All major orchestras employ a full time librarian to maintain, and augment

their libraries. The stage handling staff is responsible for distributing the music on every musician stand

prior to a performance. Some libraries such as the Morgan Library and the British Museum own in their

collections original works by the greatest composers, such as Mozart Beethoven and many others. Those

collections, for insurance purposes should be treated similarly to a rare book collection.

Theft

While musical instruments are fragile in nature and therefore easily damaged they are also susceptible

to theft. The Art Loss Register has at least 4,500 to 5,000 instruments noted as stolen or missing in their

database. Theft occurs mostly for values under $100,000 and where known, the premises of stolen or

missing instruments include private 58%, company 8%, public 6%, gallery 5%, in transit 5%, museum 3%,

warehouse 1%, church 1%, or other 13%.12 The serial number, label, grain of wood/striations, outline of

the instrument, characteristic markings/inscriptions, and unique features of the instrument are used to

identify stolen or missing instruments. In some cases, tracking devices can be inserted into the

instrument case to help prevent loss. Similar to art, the thieves have an interest in keeping the

instrument as safe as possible in order to maximize the value. However, some damage is possible if it is

not kept properly or the case is discarded. Once an instrument is recovered, damage and authenticity

are the main concerns. Thieves will often try to disguise the instrument by removing or switching its

label.

Databases

Databases are designed to provide information on a market wide basis which cannot be accumulated by

any one insurer. They may help confirm information provided at the underwriting and proposal stage by

listing value, previous damage, claims, and ownership to reduce fraud, help the insurer to include all

relevant factors in the acceptance terms, and to increase recoveries following losses.

12 The Art Loss Register, Musical Instruments database information, 3 March 2014.

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There was a time when all databases were kept on paper, obscurely codified and tucked away in dusty

stacks. Since the 1960s, technological improvements have seen the steady but exponetial growth of the

quantity of inventories and the data contained within them.13 In the past, databases were only as

effective as the information they gathered, which could never be fully comprehensive since they relied

on cooperation with and the supply of data from insurers and others. Fortunately, the field of database

management for fine art and high-value objects is changing.14

The breadth of information that these emerging databases are able to record and the technological

advances, such as image recognition software, they are utilising, is setting a new standard for the

tracking, identification and recovery of stolen objects.15 Databases record as much detail as possible for

each instrument. In order to establish the same instrument but different model apart, the instrument

must have a unique number (as many modern, higher value instruments do), or be very well recorded

like older instruments are with exact measurements, previous damage, repairs, and blemishes are

documented with high quality images of the grain of wood, labels, and written records of provenance.

Databases collect data under the following general headings; stolen, missing, looted, damaged, loans, or

ownership (current owner, in a museum, or other permanent collection never to be sold). The success of

the database is dictated by the number of due diligence searches by sellers, buyers, insurers, law

enforcement, and others who check the database in order to make recoveries of stolen items or uncover

items of fraud.16 Fraud can occur when the instrument was sold by the policy holder or there was

connivance in the loss. In order to prevent fraud, during the claim investigation stage, the loss should be

reported to the stolen database even if the claim is not agreed (or never paid) since the registration may

have information on a previous claim or claim on a second company for the same loss. If the claim is

denied but the loss was real, then the policyholder will want to recover the stolen item. The registration

should be in the policyholder’s name.

With the ability to record high-value objects with such accuracy established, the next step in tackling

theft. In many cases, it is not until the crime has been committed that information about instruments is

submitted to databases as part of the recovery effort. It is reccomended that proactive registration of

items be completed as a deterrent to would-be thieves and a contingency in the event of any loss

higher standard database is allowing law enforcement agencies, insurers, dealers and auction houses,

along with their respective clients, to benefit from greater awareness in their need for reliable data on

the provenance of musical instruments.17

The following databases accept registrations of rare musical instruments:

13 Jerome Hasler, Art Recovery International, 3 December 2014. 14 Jerome Hasler, Art Recovery International, 3 December 2014. 15 Jerome Hasler, Art Recovery International, 3 December 2014. 16 Julian Radcliffe, The Art Loss Register, 27 October 2014. 17 Jerome Hasler, Art Recovery International, 3 December 2014.

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Acoustic Music

ArtClaim

Art Loss Register (ALR) was founded in 1991 and is the world’s largest database of stolen art and

antiques including 5,000 stringed, wind, brass, keyboard, percussion and ethnographic musical

instruments. It carries out 500,000 searches a year and is used by most insurers.

Basoon

Cozio is the world’s largest source of stringed instrument and bow data, containing over 2,500

makers, 30,000 instrument and bow records and 50,000 historical auction price records. It was

founded in 2003 and is now owned by Tarisio.

GearTrack provides registration of ownership of any type of musical instrument or equipment

and records stolen items in cooperation with the ALR. It is searched by dealers and

pawnbrokers.

Internet Musical Instrument Database

Maestronet provides a sales portal for instruments and a stolen listing.

Music Tag

Musical Instrument Museums Online (MIMO)

Musical Chairs

Screaming Stone Stolen Music Instrument Recovery

Loans/Liens

Insurers may be approached for cover on an instrument on which a loan has been made. This should be

noted in the UCC State filing system so that the lenders position is protected from the borrower trying

to raise a second loan or selling the item without the permission of the lender. The UCC State system

can be checked by a buyer or lender but its existence is not well known outside the USA and it is

organized on a state not federal basis. The Art Loss Register runs a similar system for recording loans

relying on checks from potential buyers or borrowers and checking large numbers of auction and other

sales to prevent unauthorized sales.18

Types of Musical Instruments

Strings: Cello, Bass, Guitar, Viola, Violin- all have bows except the guitar

Woodwind: Bassoon, Clarinet, Flute, Oboe, Recorder, Saxophone

Brass: Cornet, French Horn, Trombone, Trumpet, Tuba

Percussion: Cymbals, Drums, Piano, Tambourine, Triangle

Bows can be valuable depending on if they are made from a master maker using better

materials and attention to detail. Musicians can create better sounds and tones with higher

quality bows.

18 Julian Radcliffe, The Art Loss Register, 27 October 2014.

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Famous Violin Makers

Antonio Stradivari was known to make the best violins in the world. The quality of its sound is

the reason for it high prices.

Carlo Giuseppe Testore was a renowned maker of musical instruments from the late 17th

century to the early part of the 18th century. He made violas, double bass, violins and cellos.

Giovanni Batista Ceruti created violins from cheap wood, making up for it by his detailed

handcrafting and construction of the instrument.

Gasparo Bertolotti da Salo

Famous Guitars Makers

C.F. Martin and Company: In 1930, the company manufactured the OM-45 Deluxe. Only 15 such

pieces were made that year.

The Fender Stratocaster is one of the most favorite instruments by esteemed rock guitar players

and musicians. Some of the legendary artists who have used the instrument are Buddy Holly,

Stevie Ray Vaughn and the legendary Jimi Hendrix and Eric Clapton

Robert Bouchet: The famed French guitar maker made only 150 guitars during his lifetime, all of

which have turned out to be very expensive and desirable

Antonio de Torres: The guitar maker from Spain

Famous Violin & Bow Makers

Famous instrument makers in addition to Stradivari include the Amati family, the Guarneri

family, the Gagliano family, Matteo Goffriller, Lorenzo Storioni, Nicolo Bergonzi, Domenico

Montagnana, and Giovanni Battista Guadagnini.

There are over 200 important bow makers, among them German, French, Italian, and English.

The most famous of them includes Hill & Son, Lupot, Tourte, Vigneron, Voirin, Dodd, Tubbs, and

Vuilllaume.

Best Underwriting Practices:

Keep musical instrument in your possession at all times, it is best to have physical contact

Use confidentiality in all aspects of location especially during travel

Keep the case closed while instrument is inside

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Forbid others to play the instrument when on loan except the person the instrument is loaned

Use a detailed loan agreement outlining security and protection measures

Notify the police immediately if instrument is missing or stolen

Be aware of airport protocol in advance

Musical Instrument Theft in the News:

http://www.jsonline.com/news/crime/stolen-stradivarius-violin-reportedly-recovered-in-good-

condition-b99199772z1-243934631.html

http://www.telegraph.co.uk/news/uknews/crime/10210695/Violinist-Min-Jim-Kym-elated-at-recovery-

of-1.2m-Stradivarius-stolen-from-railway-cafe.html

http://www.bbc.com/news/uk-england-london-25432160

http://cityroom.blogs.nytimes.com/2009/08/17/lost-violin-and-owner-are-reunited-again/

http://www.nytimes.com/2008/05/11/weekinreview/11wakin.html?pagewanted=all

http://minnesota.cbslocal.com/2012/03/23/40k-cello-stolen-from-mans-suv-recovered/

http://articles.latimes.com/2004/may/07/local/me-cello7

http://www.infowars.com/tsa-snaps-world-renowned-cellists-20000-bow/

Illustrations:

Antonio Stradivari Colossus Violin, 1716. Digital Image. The Art Loss Register, n.d.

Web. 05 November 2014.

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Baroque carved wood organ, probably by Neapolitan Masters. Digital Image. The Art Loss Register, n.d.

Web 05 November 2014.

Bronze Church Bell, 14th – 15th Century. Digital Image. The Art Loss Register, n.d. Web 05 November

2014.

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Indian Bell made from metal. Digital Image. The Art Loss Register. n.d. Web 05 November 2014

Original musical score of Liszt. Digital Image. The Art Loss Register. n.d. Web 05 November 2014

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Pear Tree and Ebony 17th Century small organ from Silesia. Digital Image. The Art Loss Register. n.d. Web

05 November 2014

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Salvi Arianna Harp. Digital Image. The Art Loss Register. n.d. Web 05 November 2014

Stradivarius Model 37 Trumpet, Vincent Bach Elkhart. Digital Image. The Art Loss Register. n.d. 05

November 2014

Systeme Limonaire Kennemerpoort Street Organ. Digital Image. The Art Loss Register. n.d. 05 November

2014