Information for lenders and applicants - Canada Travelling Exhibitions Indemnification Program

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Coverage

The Program covers most risks covered by commercial insurance, including any loss or damage to an indemnified object or appurtenance due to accident, natural disaster, vandalism, fire, theft, and terrorism. It provides what is often referred to as “nail to nail” coverage, meaning coverage begins at the moment an object is condition reported and crated for transport from the lender to the borrowing institution and ends once the object is uncrated and the condition report is completed upon its return to the lender or arrival at a non-participating institution. In other words, the Program’s indemnity includes coverage of incoming and outgoing transport and the display, short-term storage (if necessary), and installation/deinstallation of the object onsite at the participating institution.

Partial indemnity is also an option, meaning that indemnity could be requested for only specific points during the different stages of the exhibition. For example, indemnity may be requested only for the crating and transportation to the host institution, or only while the objects are onsite at the host institution. It is also possible to request that the Program’s indemnity apply only to certain objects in the exhibition and exclude others.

Exclusions and limitations

Though indemnification under the Program covers most risks common to fine arts policy coverage, there are some exclusions. Exclusions from the Program’s indemnification include:

  • normal wear and tear and gradual deterioration
  • vermin
  • inherent vice or pre-existing flaws or condition
  • radioactive contamination
  • wars, strikes, riots and civil commotion
  • repair, restoration or retouching processes not approved by the Minister
  • willful misconduct or gross negligence of the owner or the participating institution, including their employees
  • any loss or damage that occurs at a non-participating institution that is unrelated to the transit of the indemnified property to or from a participating institution

Some exclusions may be waived on a case-by-case basis if a formal request is made with the application and measures indicating how the risk will be mitigated are provided.

Indemnity is limited by the Canadian Travelling Exhibitions Indemnification Act to a maximum of $600 million CAD per exhibition. The amount of contingent liability available, as specified in the Act, is $3 billion at any given time. If necessary, commercial insurance must be purchased to cover the value of objects and appurtenances in an exhibition in excess of the amount indemnified under the Program.

Indemnification coverage for indemnified objects and appurtenances in a single conveyance is limited to $100 million CAD in order to diffuse the concentration of risk during transport. If the value of an individual indemnified object or appurtenance exceeds $100 million CAD, commercial insurance must be purchased for the excess amount while the item travels.

The maximum time period covered under the Program is 2 years; however, this period may be extended for an additional year once the agreement is in effect to accommodate additional venues or should unforeseen delays in transit occur.

Objects owned by the applicant will not be indemnified while on exhibition at the owner institution’s premises, but indemnity for these objects may be requested while they are in transit and exhibited at other venues.

An indemnified travelling exhibition may also travel to non-indemnified venues within Canada. Non-indemnified venues are responsible for purchasing their own insurance coverage for the travelling exhibition. Any period during which the exhibition is exhibited outside Canada is excluded from indemnity.

After reviewing an application, the Program may also decide to limit coverage to specific elements of the exhibition, if certain risks are not mitigated to its satisfaction.

The Program must be notified of any change to any aspect of the exhibition (for example, objects, loan agreements, display, transport, shipping, or environmental conditions) that may affect the risk to indemnified objects throughout the period of indemnity. Failure to do so may result in non-payment should damage or loss occur as a result of these changes.

It is recommended that applicants review the Model Indemnity Agreement and share the agreement with prospective lenders to fully understand the conditions related to indemnification through the Program.

About fair market value

The fair market value of each object for which indemnity is requested must be provided in the application. For the purposes of the Program, fair market value is defined as being the highest price, expressed in dollars, that the property would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other. In the event of a total loss, the Minister of Canadian Heritage must compensate the owner for the value of an object based on the values set out in the Indemnity Agreement.

As part of the application process, the Program asks that each value assigned to an object by the lender be reviewed by an independent third-party reviewer. The reviewer must therefore be knowledgeable about the fair market value of the objects to be indemnified. Reviewers are expected to conduct adequate research to ensure that the values provided by the lender are in keeping with this definition of fair market value. If a reviewer’s research suggests that a value is too high, the reviewer should indicate an appropriate fair market value for the object based on the above definition.

The individuals selected to conduct the review must have expertise with respect to the objects they are evaluating. Where an exhibition contains a diverse range of objects, several specialists may need to be consulted. These may include art dealers or auction houses, or a curator unaffiliated with the exhibition. Anyone directly involved with the exhibition, such as the staff of the applicant institution, another participating venue or the lenders cannot provide a fair market value justification.

Deductible

The deductible, as set in the Regulations, is based on the total fair market value of the exhibition. This serves to transfer the risk and cost for lower-value claims to commercial insurers and establishes a shared responsibility and partnership between host institutions and the Government of Canada.

The deductible is calculated as follows:
Total fair market value of the exhibition ($ CAD) Deductible ($ CAD)
$500,000 to $3,000,000 $30,000
$3,000,001 to $10,000,000 $40,000
$10,000,001 to $50,000,000 $50,000
$50,000,001 to $100,000,000 $75,000
$100,000,001 to $200,000,000 $200,000
$200,000,001 to $300,000,000 $300,000
$300,000,001 to $450,000,000 $500,000
$450,000,001 or more $700,000

Condition reporting

Progressive condition reporting is a fundamental aspect of the Program. Should a claim be made, condition reports are crucial in establishing the time, place, cause, and extent of any loss or damage.

The indemnity period begins with the completion of a condition report. Most frequently, this report is completed upon crating of the objects for transit to the applicant institution, though it will depend on the indemnity coverage requested by the applicant.

This first condition report establishes baseline information that may be used to determine the cause and extent of damage, should a claim to the Program be filed. Applicants are required to provide copies of the condition reports within 15 days after indemnity begins, if requested by the Program.

Subsequent condition reports must be prepared each time indemnified objects and appurtenances are packed and unpacked during the indemnity period. The last condition report is typically after transit of the indemnified object to a non-participating institution or upon return to the lender. This last report marks the end of the indemnified period.

If there is loss or damage to an object or appurtenance that is subject of an indemnity agreement and a claim is filed, the claim must be accompanied by all condition reports that have been completed in respect of the object or appurtenance throughout the travelling exhibition.

The Program’s requirements for condition reporting can be found in Part 2 of the application form.

Indemnity Agreement

The Indemnity Agreement is a contract between the Minister of Canadian Heritage on behalf of the Government of Canada and the owner of the indemnified objects. Once indemnity has been approved, Indemnity Agreements will be sent to the applicant electronically through a secure channel for distribution to the lenders. Once signed by the lender, the Agreements are then returned to the Program to be countersigned. Agreements must be signed and countersigned before the beginning of the indemnity period. The Indemnity Agreement pledges that the Government of Canada will pay the agreed upon amount, subject to the specified deductible, in the event of a valid claim for loss or damage to an indemnified object or appurtenance. The Indemnity Agreement includes most standard fine arts policy coverage provisions with some exclusions.

It is encouraged that all applicants review the Model Indemnity Agreement and share it with prospective lenders. This will allow applicants to adjust their exhibition planning and arrange for commercial insurance should a lender decline to accept Canadian indemnity.

Amendments

The Indemnity Agreement is prepared based on the information supplied in the application. The Program must be informed in advance of any changes affecting the time period, venues, list of indemnified objects and appurtenances, and/or the packing, shipping, security, storage, and environmental conditions as stated in the application so that consideration may be given to amending the Indemnity Agreement if required.

Any amendment to the Indemnity Agreement, including additions or deletions to the list of indemnified objects, or changes to the indemnity period, must be made with sufficient time allowed for review.

Requests for additions to the object list will not be approved after the indemnity period has begun. The Program must be notified of any deletions from the list, so that these objects or appurtenances are removed from the Indemnity Agreement and the value covered is reduced accordingly.

Claims process

Reporting damage or loss

The owner, or owner’s designated representativeFootnote 1, must inform the Program in writing of any instance of loss, damage, or deterioration to an indemnified object or appurtenance during the indemnity period within 2 business days of its discovery, regardless of whether a claim will be submitted. The deductible stipulated by the Program is not per item, and therefore individual instances of damage, although minor enough in themselves to fall under the deductible, could potentially accumulate to a point that would eventually result in a claim.

Mitigation of loss

No conservation work is to be undertaken on an indemnified object or appurtenance without the consent of the Program, unless the case is one of extreme emergency. In such cases, only conservation work necessary to stabilize the object or appurtenance to prevent further damage or deterioration should be undertaken.

Making a claim

Where a valid claim of loss or damage to an indemnified object or appurtenance exceeds the deductible, the Government of Canada will cover the liability above the deductible. The owner must file the claim in writing as set out in section 11 of the Canada Travelling Exhibitions Indemnification Regulations. In the event of partial loss or damage, the owner may either request that the Minister of Canadian Heritage have the object or appurtenance restored to its former condition, or request the Minister pay the amount for the corresponding loss in accordance with the terms of the Indemnity Agreement. Restoration costs include costs of the actual repair to the object or appurtenance as well as relevant associated costs pre-approved by the Program (such as additional crating and transportation) but do not cover depreciation in value to the object subsequent to the repair. All claims should be sent to dgpindemnisation-dghbindemnification@pch.gc.ca.

Valid claims will be paid out to the owner by the Minister on behalf of the Government of Canada, as set out in section 12 of the Regulations. In most cases, payment can be made in the owner’s currency. The procedure for resolving disagreements between the parties regarding the validity of a claim or the amount by which the fair market value of an object or appurtenance has been reduced is set out in sections 13 and 14 of the Regulations.

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