A Second Look: When to Recommend an Appraisal Update or a Second Appraisal
An appraisal update, or a second appraisal at the time the jewelry is being insured, can avoid future losses, deter scams, save settlement costs and ultimately increase policyholder satisfaction.
Last issue we discussed the importance of regularly updating an appraisal to check valuation against the current market. Prices of gems and precious metals can fluctuate, and the jewelry’s insured valuation should reflect its current market value.
Accurate valuations, complete descriptions, or even just having the jewelry inspected, can have other advantages that aren’t immediately obvious. Here are some circumstances where a second look is of value.
Accident Waiting to Happen
The most basic reason to have scheduled jewelry examined every few years is to check for conditions that might lead to a loss. A jeweler can look for and correct such things as a faulty clasp or a stone loose in its setting. The selling jeweler will often perform such an exam free of charge, as a service to the customer. Preventative maintenance ought to be encouraged, since it is in the interest of the policyholder as well as the insurer.
Many gems undergo treatments, or “clarity enhancements,” to make them look more attractive. Some treatments break down over time, making the stone appear to be damaged. Treatment breakdown is not damage for which the insurer is liable.
An appraisal should always list any treatments, such as laser-drilling and fracture-filling (Yehuda treatment), not “usually” done to that gem type, as defined by the Gemstone Enhancement Manual. If no such treatments have been done, the appraisal should state that the stone is untreated. Some untreated gems are worth more than treated gems of similar appearance. For example, an untreated Burma ruby is 100 times more valuable than a treated stone.
If treatment information is lacking, the insurer should urge the owner to have the piece appraised by another jeweler — preferably by a Certified Insurance Appraiser™ on an ACORD 78/79 appraisal form.
A stone with an abundance of fractures or inclusions of non-gem material is inherently weak. A heavily included emerald, for example, is likely to break easily. Laser drilling and fracture filling may improve the stone’s apparent clarity by disguising flaws, but they do not improve the quality of the stone or its value.
A stone is also more susceptible to breakage if it is poorly cut, having a girdle that is “very thin” or “extremely thin.” Most appraisals do not include complete cutting information. Use ACORD 18, Jewelry Appraisal and Claim Evaluation Form, to check for complete cut details.
If the appraisal lacks detailed information on cut and clarity, ask for an appraisal on ACORD 78/79 or ACORD 805, Sales Receipt for Insurance Purposes.
Wear and Tear
Many people assume jewelry that is reasonably well cared for will retain its value, since gems are so sturdy. However, many gems are subject to wear and tear. Coral, opal, pearl, lapis lazuli, etc., are soft and can be easily scratched, causing them to lose value. Diamond, which is the hardest mineral (meaning it can’t be scratched by other minerals), is actually quite brittle and can chip easily. Jewelry with such gems should be regularly examined for wear and tear.
Damage During Cleaning or Resetting
Many gems can be damaged from improper cleaning, such as by boiling, chemicals or ultrasound. Others can easily be damaged during resetting or can even crack under pressure from a poorly designed mounting. An appraisal from a disinterested appraiser would note if the setting were inappropriate or dangerous for the stone. The insurer is not liable for damage caused by improper setting or cleaning.
Appraisal Provided by Seller
An appraisal provided by the seller should not be considered a sufficient basis for insuring jewelry valued at more than $20,000. This advice applies whether the appraisal was written by the seller or bears the name of another appraiser or lab; if the customer received it from the seller, it is questionable. Many retailers supply appraisals that inflate valuations far above the selling price to make customers feel they are getting a bargain. Some retailers offer “certificates” as evidence of the gem’s value, but these documents can come from unreliable labs. (“Bogus Appraisals & Fraud” has more about the dangers of relying on retailer-supplied documents.)
For high-quality jewelry, verify the valuation and descriptive details by getting a second appraisal, submitted on ACORD 78/79 and prepared by a Certified Insurance Appraiser™.
Incomplete Details on Appraisal
If the only available appraisal is not on the ACORD 78/79 form, use ACORD 18, Jewelry Appraisal and Claim Evaluation Form, to score the appraisal, verifying that all necessary details are included. If not, a more detailed appraisal is required.
ACORD 18 provides the agent with a substantial value-added service. It can be used to communicate to the policyholder in a non-threatening way that important information is missing from an appraisal, without challenging the authority of the jeweler. The client will respect the agent’s efforts to protect his/her interests and will be motivated to get another appraisal.
Claim on Damaged Jewelry
Before settling a claim on damaged jewelry, always have the jewelry inspected by a gemologist who was not the seller and is not a replacement source (both of whom stand to gain by recommending replacement rather than repair). Hire a disinterested expert and expect to pay for his services.
The examining gemologist should give a detailed description of the piece (which you can compare with the appraisal on file). He will determine:
- whether the stone is damaged (sometimes what appears to be damage is really a flaw that was always in the stone);
- how the damage was caused (breakdown of a treatment, for example, is not damage for which the insurer is liable);
- whether the damage can be repaired (jewelers make more money on replacement than on repair, so the selling jeweler may be inclined to tell you the piece must be replaced);
- when one of a pair or set is lost, whether a match for a remaining piece can be made or if it constitutes a total loss;
- the value of the salvage.
Overpayment on damaged jewelry claims is quite common, often because insurers take the word of the selling jeweler or a replacement service. Always seek the opinion of an impartial jeweler/appraiser, preferably a graduate gemologist who is also a Certified Insurance Appraiser™.
FOR AGENTS & UNDERWRITERS
For scheduled jewelry, insist on detailed descriptive appraisals. Recommend an ACORD 78/79 appraisal, which guarantees in writing that the jewelry is as it is represented. It is prepared by a Certified Insurance Appraiser™, who takes responsibility for the accuracy of his work.
Always have damaged jewelry examined by an impartial jeweler, who should
supply you with a detailed description of the jewelry, an estimation of the
cost to repair, and its valuation. Use this information as a basis for your
decision to repair or replace.
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