Million-Dollar Red Carpet Gems Require Unique Protection

This Sunday movie A-listers from around the world will promenade down the red carpet for the 91st Academy Awards, sporting garments created by a who’s who of designers, established and ascending. Designers and dealers vie for the coveted honor of outfitting celebrities with their jewelry and watches. One report estimated the total value of jewelry and watches actors wore at the 2018 Oscars at over $30 million, and many of those items were loaned to them just for the occasion.

The record for most expensive piece of Oscar-night jewelry was set in 1998 by Gloria Stuart, best supporting actress nominee for Titanic. Stuart wore a 15-carat blue diamond necklace worth $20 million, modeled by noted designer Harry Winston after an iconic item featured in the film. A $15 million necklace worn by Charlize Theron is the second priciest item; it was also created by Winston, whose pieces have been Oscar red-carpet favorites for several decades.

Earlier this year Lady Gaga accepted a Golden Globe award wearing $5 million of custom Tiffany & Co. diamond jewelry, including a necklace set with 300 brilliant diamonds surrounding a 20-carat, pear-shaped stone.

All high-end pieces of jewelry must be insured in case of accident, theft or damage. The liability usually lies with the person wearing the item even if – like some celebrities – she is being paid to do so, said Heather Posner, Associate Vice President and Director, Private Client Insurance, Burns & Wilcox. Celebrities and designers agree to a formal contract in advance that clearly outlines responsibilities and expectations, Posner added.

The agreements that govern borrowing jewelry for award shows are complex, but rarely involve designers gifting celebrities with jewelry worth millions. In contrast, clothing designers commonly bestow their red-carpet creations upon the celebrities who wear them.

Non-celebrities seeking to borrow special-occasion jewelry can either strike up a deal with their local jeweler or choose one of many online high-end jewelry rental services, including Haute Vault and Adorn. Depending on which service they use, clients should expect to demonstrate creditworthiness, submit to a background check, pay a membership fee, agree to a lengthy list of terms and conditions and provide a security deposit from one fifth to one third of the value of the item or items borrowed.

If a borrowed item is damaged, lost or stolen, these services reserve the right to charge clients a set percentage of the item’s value. A client who fails to return a diamond necklace that retails for $75,000 could, for example, owe the lender an amount ranging from $22,500 to the full value of the item.

“Some people may not even know that specialty coverage exists just for these types of scenarios.” – Heather Posner, Burns & Wilcox

Some jewelry borrowers may be unaware that other insurance policies they may hold are unlikely to cover the full value of the items they borrow or rent. A Homeowners Insurance policy, for example, may only cover a few thousand dollars of insured jewelry or other collectibles, if it covers any at all.

“Insurance can a play a major role in protecting jewelry or valuable (wearable) items,” Posner said. “Some may not even know that specialty coverage exists just for these types of scenarios.”

Yes, special coverage exists for borrowed jewelry

The specialty coverage Posner mentioned comes in the form of an endorsement to a Personal Articles Floater policy covering pieces of jewelry or other collectibles owned by a client. This endorsement covers the cost of lost or damaged items that are borrowed for special purposes, she said, and often includes limits for up to $1 million of total coverage and $250,000 of per-item coverage for an unlimited number of events during the policy’s one-year term.

“Our goal is to avoid any last-minute changes in the planning of an event that may come at a chaotic time for clients, so this policy is designed to be there throughout the year,” Posner said. “We try to underwrite the person based on the lifestyle that they lead, giving them the opportunity to borrow items for special events. With this endorsement there is no limit to the number of events that are covered.”

The Personal Articles Floater endorsement is available to any client who qualifies – not just “public figures,” Posner said. Provided a Personal Articles Floater policy is in place to cover a client’s high-value items, the endorsement can cover borrowed bridal jewelry or other valuable items worn for special occasions such as black-tie fundraisers, award ceremonies or speaking engagements. The cost of the endorsement is usually less than $1,000 for qualifying clients.

“We try to underwrite the person based on the lifestyle that they lead, giving them the opportunity to borrow items for special events.” – Posner

“We don’t think (the endorsement) is a high-risk policy,” Posner said. “People are careful with expensive items that they borrow. The key is that the (insurance) broker needs to know that such a policy is available for their clients.”

Spell it all out – in writing

Whether the jewelry borrower is a famous actor or a bride who wants to be queen for a day, he or she should have a contract in place with the lender that makes it clear who is liable if disaster strikes. Such clear wording can avoid any confusion and legal ramifications, Posner said.

“It pays to have those contracts clearly worded so the liability is clear,” Posner said.

A Personal Articles Floater can be set up as a schedule, a blanket policy or both, Posner said. In a schedule the value for all collectibles, including jewelry, wine, art or other high-value items, is listed individually. In a blanket policy the value of the collectibles is assessed as a whole.

A Personal Articles Floater policy should generally be written as a schedule for a collection containing multiple high-value items, to best protect the potential total value of the items. However, Posner said, many collections are best protected with a Personal Articles Floater that incorporates both a schedule for certain high-end items, and a blanket policy for other items.

“It really depends on what your collection is composed of,” Posner said. “Based on your lifestyle and interests, your insurance broker should be able to make recommendations that best fit your profile.”

As with any coverage need, an insurance broker or agent must be consulted. Click here to forward this article to your insurance broker or agent to ask if you need this coverage, or share this with clients to start the conversation and ensure proper protection.

This information was provided by Burns & Wilcox, North America’s leading wholesale insurance broker and underwriting manager. Burns & Wilcox works exclusively with retail insurance brokers and agents to assist clients like you with their specialty insurance needs. Ask your insurance broker or agent about a Personal Articles Floater and any related endorsements that might be right for you.