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Consignment insurance

In colorado, dealers are required by law to insure art work in their
gallery. Further, this is some part of the Uniform Commercial Code,
which is nearly universally adopted by all states. For those in
states where the dealers are telling you to provide your own
insurance, you might check the statutes. The following is the text
of the code in Colorado:

6-15-102 - Art dealers and artists - consignment of works of fine

(1) Notwithstanding any custom, practice, or usage of the trade and
any of the provisions of section 4-2-326, C.R.S., to the contrary,
whenever an artist delivers or causes to be delivered a work of fine
art of his own creation to an art dealer for the purpose of
exhibition or sale on a commission, fee, or other basis of
compensation, the delivery to and acceptance thereof by the art
dealer is deemed to place the work on consignment and:

(a) Such art dealer shall thereafter, with respect to the work, be
deemed to be the agent of such artist;

(b) Such work is trust property in the hands of the consignee for
the benefit of the consignor; and

© Any proceeds from the sale of the work are trust funds in the
hands of the consignee for the benefit of the consignor.

(2) Notwithstanding the subsequent purchase of a work of fine art by
the consignee directly or indirectly for his own account, the work
initially received on consignment shall be deemed to remain trust
property until the price is paid in full to the consignor. If such
work is thereafter resold to a bona fide third party before the
consignor has been paid in full, the proceeds of the resale are
trust funds in the hands of the consignee for the benefit of the
consignor to the extent necessary to pay any balance still due to
the consignor, and such trusteeship shall continue until the
fiduciary obligation of the consignee with respect to such
transaction is discharged in full.

(3) Notwithstanding the provisions of the “Uniform Commercial Code -
Sales”, no such trust property or trust funds shall be subject to or
subordinate to any claims, liens, or security interests of the
consignee’s creditors.

(4) An art dealer is strictly liable for the loss of or damage to a
work of fine art while it is in his possession. The value of the
work of fine art is, for the purposes of this subsection (4), the
value established in a written agreement between the artist and the
art dealer prior to the loss or damage of the work. Source: L. 82:
Entire article added, p. 230, =A7 1, effective March 25. L. 95: (4)
amended, p. 192, =A7 2, effective April 13. Editor’s
note:Subsection (1) has been renumbered on revision to conform to
standard C.R.S. format. Cross references: For the article in the
"Uniform Commercial Code" concerning sales, see article 2 of title 4. =

In Colorado, dealers are required by law to insure art work in
their gallery. 

Hi Judy, You’re overlooking one very crucial point here, namely is
jewelry considered art work (specifically in this case “fine art”)
under the law? I learned the hard way that, at least in New Mexico,
it is not. I had work in a gallery that went bankrupt and quickly
learned that while consigned “fine art” was considered the property
of the creator not the gallery (and therefore could not be seized by
the banks), this was not true of jewelry since it is not defined by
the law as “fine art.” This differs from state to state but don’t
consider yourself protected even in Colorado until you check this


Ms. Hoch, Thanks for posting the Colorado statute, but nowhere
therein do I see a requirement for the gallery to provide insurance.
Only that thry are responsible for goods entrusted to them. I am a
jeweler and have never been able to find an insurance company that
would insure me for consigned goods. Only the owner of the goods
can insure them, as they explain it, not the consignee.


and have never been able to find an insurance company that would
insure me for consigned goods.  Only the  owner of the goods can
insure them, as they explain it, not the consignee." 


This would be quite a problem for most jewelers. How would you
insure the jewelry belonging to your customers, while in your shop
for repair? Jewelers Mutual, Zurich, and Lloyds all write policies
to cover work belonging to customers, goods on memo, and goods on
consignment. All of these companies will also write a policy to
insure your work that is consigned to another or at a trade shop,
but you will pay a hefty premium for this.

I know that the insurance laws change from state to state. Perhaps
this is a Colorado thing? If anyone else has experienced this, let
me know.

My consignment contract states that the work is “on loan” to the
gallery for exhibition, and that the gallery is acting as my agent
in brokering the sale between me and their customer. The work
remains in my possession, until it is transferred to the customer
(when the sale is finalized). At no time does the gallery have any
rights of ownership (unless they, of course, purchase the work for
themselves). After the sale they will transfer payment to me, less
their commission. They are also required to fully insure the work
for loss or damage, while in their care. For a major show, I often
request their insurance be attached to the contract.

Before I consign work to a gallery, I take the time to get to know
them. I talk to other artists who are exhibiting work at the
gallery. I only deal with galleries that I feel I can work with as
"friendly partners." I hate asking them to sign such a formal
contract, but we live in a society controlled by laws and lawyers.

Doug Zaruba

I would like to share an incident with my insurance company(ex) a
while back. When I opened my store, being not very knowledgeable on
the subject of insurance for a jewelry store, I relied on my
insurance broker / company to properly insure me. They dictated the
steps I needed to take to get the insurance, alarms and all. They
included coverage for off premises (shows) and third party goods
(repairs and consignments). Well about three years into the venture,
and having increased my coverage for inventory a couple times, I
took a rather large piece of black opal rough on consignment. It was
valued at $40,000, which was near the limit of my third party
coverage. I called my insurance company and asked them to boost the
coverage to cover this stone. What a shock I received. They
informed me that my policy didn’t include jewelry and a Opal, even
in the rough, was considered jewelry. I found that although I had
$150K coverage on inventory, I only had $2500 on jewelry and loose
stones. I had been paying for coverage that I didn’t have for over
three years. Needless to say, I didn’t sleep very well after that.
It might be well for all to take a look at what is really covered by
their policy, not just look at the coverage amount.

Don Rogers

Hi, Don- My 2cents- calling your insurance company is a good first
step, but do not place 100% reliance on what you are told. I say this
for two reasons; The first reason is that the person on the other end
of the phone, if they are an insurance company customer service
representative, is often underpaid, frequently poorly trained, and
not always the brightest. In short, their opinions are not
infallible. The second reason is that your written certificate of
coverage carries more weight than a phone conversation. There is no
substitute for reviewing your certificate of coverage yourself. If
the insurance company’s actions don’t appear to jibe with what you
see in black and white in your certificate of coverage, you have the
basis for disputing their decision.

Lee Einer