Title insurance "still not broadly accepted"

A New York Times article this weekend on avoiding "legal pitfalls when buying art" (the usual suspects: title and authority to sell an artwork, whether it is subject to I.R.S. liens and/or security interests for unpaid loans and the need for contractual protections) interestingly mentions the market's persistently lukewarm reaction to title insurance. Although hedge funds have shown some interest in purchasing coverage, high-net worth individuals have generally opted not to get insurance. The reason for this seems to be that insurance is not inexpensive (1-5% of the value of the work) and a one-time premium is required to be paid upfront as a lump-sum rather than in installments. Furthermore, coverage is usually limited to title defects and excludes otherwise fraudulent sales.

Donn Zaretsky once referred to "the fundamental weirdness of art title insurance" (insurance traditionally covers future not past events) and the unusual disparity of information between the insured and the insurer. Though I appreciate the legitimate concern regarding the insured's possible exploitation of the insurer, I personally don't think the nature of art title insurance is a major factor accounting for its relative lack of success. In any case, one could interpret the risks covered by title insurance as being future events since breaks in a chain of title technically only become problematic if and when claims are brought in the future against a new owner (and even then, statutes of limitation often bar claims though the bringing of a claim would pose a problem in itself if the buyer wished to resell).