Elements of Value

January 1999

Managing:Appraisals

Elements of Value

Appraisers should describe a jewel's tangible and intangible value elements completely. Then if the piece is lost, the owner can obtain a true replacement from the insurer

BY AL GILBERTSON

A jewelry appraisal is often called a valuation, indicating the piece has elements that create value. While the bottom line of an appraisal may be a number with a dollar sign, it's incomplete without listing and explaining the elements that create the value.

Insurance companies will use the appraisal to determine how to replace lost or damaged jewelry. But insurers word their policies carefully to protect themselves against excessive claims.

One of the most common phrases in a policy deals with how an item will be replaced if it's lost, stolen or damaged. Example: "Payment will not exceed the amount necessary to repair or replace the damaged item(s) with property of like kind and quality, or the amount of insurance, whichever is less" (see facing page for a full explanation of this statement). An appraiser – and anyone else who provides a document used to obtain insurance – should pay careful attention to this statement.

Make Descriptions Complete
If you describe a ring merely as 14k yellow gold and 12.5 grams in an appraisal report, the insurer can procure any 14k ring that weighs 12.5 grams. But if you state the ring has the copyright of a prominent designer or name in the industry, the insurer is obligated to replace it with an item of "like kind and quality," which means the same designer, unless the client agrees to accept a lesser item or an item by a different maker.

Consider this example: A jeweler in Oregon wrote an appraisal for a diamond with a serial number and the logo of a prominent diamond cutting firm laser-inscribed on the girdle. The appraisal said the diamond was G color, VS1 clarity and Ideal cut, but didn't mention the laser inscription. When the ring was stolen, the insurer replaced it with an Ideal cut that met the standards described in the appraisal but wasn't the same price as the original. The customer appealed to the state insurance division but was turned down because the appraisal didn't indicate the laser inscription. The insurer was obligated to replace only what the appraisal described.

Define Value Elements
Here are some detailed elements of value in common jewelry components:

Colored gemstones

  • Recognized color system description (such as Gem Dialogue or Gemset).
  • Specific clarity descriptions.
  • Cut quality description.
  • Millimeter measurements and weight (estimated or known) of major gems.
  • Clear description of quality of any phenomena (such as cat's eye).
  • Discussion of probable treatments.

Diamonds

  • Identification by measurements when over 0.25 carat (you may choose another size). Note any "brand" inscriptions on the diamond itself.
  • Cut quality by a recognized system (such as American Gem Society).
  • Color and clarity. Describe the system used – if using Gemological Institute of America terminology, for example, don't state an actual GIA color or clarity grade unless GIA has in fact graded it. Instead indicate the diamond is an "approximate GIA color and clarity grade." Clarify how you determined color – such as by use of a GIA cubic zirconia master set or GIA master set of three diamonds, F, H and K.
  • Identification of any treatment.
  • Weight, estimated weight or both when appropriate.

Jewelry Mountings

  • Metal, color and quality (fineness).
  • Style, period (circadating or period style – Retro, for example).
  • Measurements and weight.
  • Method of manufacture (mass manufacture, die-struck, cast, handmade).
  • Identifying marks (stamp, trademark, serial numbers, model numbers).
  • Apparent repairs, past or needed.

Limitations
Include any limitations as to how the item might be replaced:

  • Discontinued models that might be replaced by a comparable model.
  • Antique or period jewelry that can't be replaced with identical items.

Additional Protections
If you feel the insurer may compete with you by buying a replacement from another source with access to the same designer, you might try the approach of one jeweler who states on the appraisal report: "A copyright item is indicated by a registry # and assures you of replacement with an identical or similar item. The item is a copyright design and if insurance replacement necessitates a 'like kind and quality' replacement, only replacement with the same copyright design is acceptable. Unauthorized reproduction of this item will result in prosecution under copyright law." Note the registry number on the brief description of the item. Include a moderate description to justify the value for the insurer.

One catch – suppose the item is stolen and recovered. Can police identify the item from your description on file with this registry number? Make sure your registry records have all critical details (elements of value) for adequate ID – even if they're not all on the appraisal.

 InsuranceLingo

Insurers have certain procedures for settling losses. Appraisers should note that actual cash value policies promise only to replace an item of jewelry with "property of like kind or value." If an appraisal is vague, your client could end up with an inferior item because the insurer determined replacement without all the facts. Here's how one "actual cash value" policy reads (in part):

"Loss or damage to covered personal property will be settled on an actual cash value basis. This means there may be a deduction for depreciation. Payment will not exceed the amount necessary to repair or replace the damaged item(s) with property of like kind and quality, or the amount of insurance, whichever is less."

Under "agreed value" policies, insurers are obligated to pay the amount for which the jewelry was insured. The verbiage typically states: "If the itemized article is destroyed or lost, we will pay the amount of coverage for the article ... If the itemized article is partially lost or damaged, we will pay to restore the item to its condition just before the loss or make up the difference between the market value before and after the loss."

– AG

Al Gilbertson owns Gem Profiles, an appraisal service in the Pacific Northwest. A member of the American Gem Society and the International Society of Appraisers, he was also a member of the Jewelers Vigilance Committee's Appraisal Task Force, the Gemological Advisory Committee of the AGS Gem Lab and the AGS Appraisal Committee. He is a fellow of the AGS Jewelers Education Foundation, director of research for the Diamond Profile Laboratory and editorial adviser toThe Guide, published by Gemworld International.



Copyright © 1999 by Bond Communications.


 

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