Allocating risk through contracts – it’s an art!

Contracts often seem convoluted and obscure, full of legal jargon capable of sending even the finest of wordsmiths running. However, contracts are an essential tool artists can use to protect themselves against costly risks.

In any contract for the provision of products or services by an artist there is potential for something to go wrong which may result in a loss or damage. For example, artwork may be damaged during transport or installation; others may try to copy an artist’s work; there may be a fire that causes damage to the premises where an artist works; or an artist’s employees or contractors may be injured during the course of completing the works.

Artists must turn their minds to potential risks when entering into a contract and ensure that they have adequate insurance to cover them for any loss they would not otherwise be able to, or want to, pay out of their own pocket.  Artists should also carefully consider the terms of any contract as they may specify which party is responsible for a particular type of loss, and require that party to obtain insurance to cover such loss.

Indemnity clauses

An indemnity is an agreement by one party to cover loss or damage suffered by another.  Indemnity clauses operate in artists’ contracts to allow a party to recover costs for loss or damage from the party who agreed to indemnify them.

Consider the example where a local Council commissions an artist to build a sculpture for a local community park and during its installation part of the sculpture breaks off, landing on a young boy playing nearby and breaking his arm.  Let’s assume the artist and Council had signed a contract which included the following term:

The Council will indemnify and keep indemnified the artist against all losses, liabilities, costs and expenses (including reasonable legal expenses as between solicitor and client) arising out of or in relation to any injury, death, loss or damage suffered by any third party during the production and installation of the Artwork or which arise for any reason following delivery and/or installation of the Artwork.

Subject to any other clauses in the contract that may impact this arrangement, this clause has the following implications:

if the young boy claims the costs he incurs as a result of his injury from the artist, the Council must reimburse the artist for any amount he or she has to pay to the boy, and
the Council must pay the costs to rectify the damage to the artwork which may include paying for the artist’s time and labour, as well as materials.

Insurance clauses

Insurance clauses and indemnity clauses often go hand in hand, because an indemnity clause will have no use if the party obligated to indemnify the other party has insufficient funds available to do so.  This may be hard to imagine in the example we have described above, but consider other situations where the loss is much greater or where the contract instead requires the artist to indemnify the Council.  It is therefore important for both parties to an agreement that the party bearing the risk of loss under an indemnity clause also be required to obtain insurance to cover that loss should it eventuate.

The type of insurance required will depend on the type of product or services being provided by the artist and where, how and by whom, the works will be completed.  Some insurance is mandatory, such as workers compensation which covers wage replacement and medical benefits for employees and is a legal requirement for all employers in New South Wales.  Therefore, even if a contract doesn’t require it, an artist employing other workers must maintain workers compensation. For more information concerning whether a contractor is ‘deemed’ an employee, see WorkCover. NOTE: If an artist is a sole trader or in a partnership, they are not considered employees and thus are not eligible to take out workers compensation insurance. In this situation, alternatives for the artist would be to take out personal accident or injury insurance or income protection, although it is not a legal requirement for them to do so.

Public liability insurance could be obtained to provide protection for costs incurred where a third party suffers bodily injury or property damage as a result of an artist’s work.  In the example used earlier, it would have been appropriate for the contract to require the Council to maintain public liability insurance.  This is not only because the contract terms required the Council to indemnify the artist for this kind of loss, but also because the sculpture was installed in a public place maintained by the Council and over which the artist has no control.

The location where the artist works to create the sculpture will also have implications for the insurance the artist should obtain.  It’s likely that the artist would have been required under the commissioning contract to maintain public liability insurance up until the time the sculpture was installed in the park if the artist had primary control over the location where the sculpture was created.

If an artist is leasing the premises where their works are created, the artist will need to consider the terms of their lease to work out whether they are liable for any damage to the premises caused by their actions, or those of their employees or contractors.  This might be particularly relevant for those employing high risk techniques in their works such as metal work like welding and grinding.  The artist should also consider obtaining first party property insurance to cover any damage caused to their personal property and equipment.

Artists may also need to consider whether a contract specifies which party is responsible for paying the costs to repair an artwork if it’s damaged during transportation.  Transport insurance may be a particularly important consideration if the artwork is particularly valuable or where artwork is regularly moved, for example as part of a touring exhibition. It is also important to make sure that transport insurance covers the type of artwork or materials the artwork is made from, for example glassworks.

What you should do

As a rule, when presented with a contract, an artist should carefully consider the terms and identify any risks for which they may bear the responsibility, and ensure they are comfortable with that arrangement.  Where they are unsure, artists should seek independent legal advice.  Depending on the complexity, generally a review of a contract can be conducted by a lawyer for much less than one might think. For example, Arts Law provides a very low cost Document Review Service for artists and arts organisations. Artists should then take steps to obtain the necessary insurance to cover any loss they may be responsible for as a result of the contractual terms.

Even where a contract does not require it, artists should still consider taking out insurance to protect themselves from suffering losses they can’t afford, or where insurance is required as a matter of law as in the case of workers compensation.  There is no ‘one-size fits all’ policy and artists should seek advice from a lawyer and an insurance broker to ensure they are adequately protected. In some cases, group insurance may be available and a cheaper option for artists. For example:

• NAVA provides a members-only public and product liability and professional indemnity insurance package for visual artists and craftspeople;
• Ausdance provides a members-only public and product liability and professional indemnity insurance package for dance teachers, dancers and dance companies;
• Duck for Cover provides members-only public liability insurance for performance based artists;
• Flying Arts provides a members-only public and product liability and professional indemnity insurance package for artists, artworkers, writers and musicians and extends to limited cover for teaching and training students;
• Local Community Insurance provides insurance to clubs and community groups;
• Regional Arts NSW provides public liability insurance and volunteer insurance cover for incorporated entities in New South Wales, provided the entity is an affiliate of Regional Arts NSW;
• Regional Arts Victoria provides public liability insurance and volunteer insurance cover for arts groups and individual artists. Although the organisation focuses on Victorian artists, its insurance policy is available to artists throughout Australia.

Further resources

For more information see the following Arts Law resources:

• Catherine Fargher and Seth Richardson, The Arts Insurance Handbook: A Practical Guide for Artists and Arts Organisations, 3rd ed, Arts Law Centre of Australia
• Liability and Insurance information sheet.

Written by Sarah Winter-Irving and Hannah Rose, solicitors at Sparke Helmore Lawyers