“Jewelers Vigilance Committee Inc. Appraisal Task Force Recommended Minimum Guidelines for Insurance Cost Estimate Documentation for Jewelers,” ©1995 by the Jewelers Vigilance Committee Inc.
The Jewelers Vigilance Committee (JVC) and its Appraisal Task Force (ATF) have developed these guidelines to address the needs of jewelers who want to provide their customers with insurance documentation for the type of items they regularly sell. They are intended as minimum requirements for providing an estimate of replacement cost for intended use in obtaining insurance at the current actual selling prices of a particular establishment or seller. It is the opinion of the JVC ATF that following these minimum recommended guidelines will provide a broad and positive first step toward assuring fair insurance premiums and settlements.
The JVC ATF, having conducted a thorough study of the subject, recommends that any document represented as an “appraisal” or “valuation” should conform to the Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Foundation as a minimum standard (see Appendix B: “Sources of Appraisal Training and Information”). USPAP has been endorsed by several appraisal societies and government agencies and is rapidly gaining acceptance as the minimum standard for all types of appraisals. The task force recommends that sellers provide an insurance replacement cost estimate in lieu of an “appraisal” unless the documentation would at least qualify as an appraisal according to USPAP standards. Accordingly, these guidelines do not address the preparation of insurance “appraisals.” While it is both proper and possible for the seller to provide an insurance appraisal for an item, a true “appraisal” requires formal training beyond the scope of these guidelines.
The preparation of the insurance replacement cost estimates described in these guidelines requires the ability to recognize, grade and otherwise qualitatively rank and adequately describe the item involved. The preparer may consult with gemological experts or laboratories in order to accomplish this requirement. Formal gemological training is recommended in addition to familiarity with the metals and techniques of jewelry manufacture. The item must be of a type and quality sold by the preparer, who must be able to provide an appropriate replacement for it.
These are recommendations only. Jewelers must take their liability into consideration. “Opinions” given by jewelers have been held to be expert, making jewelers legally responsible.
JVC, its officers, directors, ATF members and/or anyone else connected with this project disclaim any and all liability that might arise from their use as these are guidelines only and users must be certain their knowledge, training and ability are capable of meeting all challenges that might occur.
Cost estimates given by jewelers on jewelry they did not sell are a mine field. Complete agreement was not reached by JVC ATF members regarding jewelers giving cost estimates on such items. Extreme caution must be exercised. Examples might be from the most simplistic jewelry to rare gemstones such as fancy color diamonds or alexandrites, one-of-a-kind handmade pieces, designer jewelry, antique and/or anything not sold by your store.
Point of Sale Documentation as an Express Warranty
Documents providing descriptions and/or any representation of quality and/or value to be used for the purpose of obtaining insurance and given by the seller at the point of sale have been interpreted as express warranties (guarantees) under the Uniform Commercial Code (Article 2, Sales, 2-313, Express Warranties by Affirmation. Promise Description, Sample). (Daughtrey v. Ashe, Record #910054, Supreme Court of Virginia, 1992.) Accuracy and completeness of description and an accurate statement of replacement cost are of paramount importance to both the jeweler and the customer.
Subjectivity of Descriptions
Descriptive elements which are subjective in nature should be clearly and prominently stated as subjective in any form of insurance replacement cost documentation. (See Appendix A: “Sample Disclosure Statements” for an example.) In addition, any limiting conditions that hampered the grading or identification of a particular gemstone should be specifically disclosed.
Representations of Replacement Cost
Any insurance documentation prepared by the seller (or their agent) for the buyer should clearly and prominently disclose any variance between the actual price paid and the estimated replacement cost, and the reason for the discrepancy should be explained (see Appendix A: “Sample Disclosure Statements”). Failure to do so may result in cancellation of insurance even after a loss has occurred. Insurance practices allow for cancellation of policies if any fact that might have caused the insurer to refuse the application or charge a higher rate was omitted at the time the policy was issued. Use of an “independent” (non-employee) preparer does not waive the seller’s responsibility in this regard. The replacement cost estimate should always approximate the seller’s usual selling price. It should not be based upon unrealized asking prices, prices prior to discounts or a manufacturer’s recommended retail prices.
In the opinion of the JVC Appraisal Task Force, the preparation of any insurance documentation containing overstated replacement cost estimates is misleading and does not serve the best interests of the consumer, the jewelry community or insurers. Preparers of such documentation might be held liable. The JVC ATF recommends not adding any percentage or buffer against anticipated inflation to the estimate.
Certain obligations and responsibilities are accepted by those preparing any type of insurance documentation. Preparers of such documentation are holding themselves out as experts, and the law holds experts to a higher degree of care. Preparers of insurance documentation bear full responsibility for content and accuracy.
In the opinion of the JVC ATF:
· It is improper to report false or misleading replacement costs in order to close sales. It is improper to misrepresent quality or exaggerate replacement costs.
· It is improper to provide an insurance replacement cost estimate without being reasonably certain the item could be replaced for an amount at or near the stated replacement cost at the time it is provided, either from the seller’s own inventory or through suppliers normally accessible to the seller.
· Known past, or present or contemplated future interest in the subject items must be disclosed in the document. It is improper to misrepresent one’s appraisal or gemological credentials.
· It is improper to disclose the identity of customers or confidential information obtained from customers unless required by 1aw to do so.
· Records of all documents and relevant work sheets should be retained indefinitely.
· Reliance on representations of quality or quantity made by third parties such as gemological laboratories, manufacturers or suppliers must be disclosed. (See Appendix A: “Sample Disclosure Statements.”)
LEGAL CONSIDERATIONS AND SUPPLEMENTAL REQUIREMENTS
If any part of these guidelines is found contrary to the law or public policy of any jurisdiction, the JVC ATF recommends that preparers defer to such law or public policy. Insurers may have additional or supplemental requirements for documents to be used by their agents and underwriters. In addition organizations endorsing these JVC Appraisal Task Force recommended guidelines for their members might require more exacting standards as these guidelines are a minimum and not a substitute.
Recommended Statements and Disclosures
It is recommended that every insurance replacement cost estimate based on the selling prices of a particular establishment contain the following statement or one with the same meaning:
“This document was prepared to provide an estimate of replacement cost through (NAME) Jewelers for the intended use of obtaining insurance. Any other use of this document is invalid and likely to mislead others who might rely on it.”
Insurance documentation of items you do not normally sell and that could not be replaced through your store requires advanced gemological and appraisal training outside the scope of these guidelines and should not be attempted without that training.
The date the insurance replacement cost estimate applies should be stated. This may be the date of sale (if recent) or the date of examination. If the date of examination is different from the date the replacement cost applies, both should be stated.
Every document should state the anticipated method of replacement (with a new item of like kind, with a similar used item, with an identical item from the original manufacturer, by reproduction, etc.). If there is more than one feasible method of replacing the item, it is sometimes advisable to report more than one possible replacement cost. The circumstances pertaining to each insurance replacement cost estimate should be clearly explained. This gives customers and insurers the option to agree in advance and may prevent future conflicts.
The “Statements and Disclosures Checklist” that follows is intended to provide a partial list of those elements that are often important in the description of gemstones and jewelry.
Statements and Disclosures Checklist
Does your customer intend to use the document only for insurance purposes?
Yes: Include a statement that obtaining insurance is the only valid use of the documentation.
No: Preparation of documentation for any other use requires advanced appraisal training outside the scope of these guidelines and should not be attempted without that training.
Can the item be replaced through your store?
Yes: State your ability to replace and the anticipated method of replacement.
No: Preparation of documentation for items you do not regularly sell requires advanced appraisal and gemological training outside the scope of these guidelines and should not be attempted without that training.
Are you reasonably certain of the identity, quantity and quality of the item and its component parts?
Yes: State the methods used to determine the above, including any reliance on the representations of others, such as outside laboratories or gemologists, manufacturers and suppliers.
No: Do not provide documentation. (continued on page 148)
If the item contains gemstones:
Include a statement disclosing the existence of an acceptable range of accuracy in gemstone grading (see “Certification” and Appendix A). The limitations inherent in grading mounted gemstones should be explained if the gemstones are mounted unless they were graded and weighed prior to setting.
Disclose any assumptions made as to identity, quality or quantity of the item or any of its components, and explain why they were appropriate.
Indicate the potential impact on replacement cost. If the impact would be significant, you should not make the assumptions and should not provide the documentation without somehow verifying identity, quality and quantity. (See “Descriptive Guidelines.”)
Include a certification as described in the “Certification” section of these guidelines.
Some of the statements and disclosures elsewhere in this checklist can be covered in a standard certification section. The words “unless otherwise stated” can be used to disclose the most common situation, and deviations from the norm can be disclosed by “otherwise stating” when appropriate elsewhere in your document. The certification includes other important but standard information in concise form.
Did you sell the item?
State whether or not you sold the item and disclose any other past, present or anticipated future interest you may have in the item.
If you sold the item, is the replacement cost estimate the same as the actual price paid?
Yes: State that they are the same.
No: Explain why the item could not be replaced through your store for the price paid. Unless the item was not sold directly to the current owner, disclose the actual price paid. (See Appendix A.)
If you did not sell the item:
State that you regularly buy and sell this type of item and could provide a replacement for it in the event of a loss. You are responsible for correct identification and evaluation of any gemstones and should be able to judge the relative quality of workmanship in any mountings and recognize any other significant characteristics impacting the type, quality or replacement cost of the item. Consultation with other experts may be necessary. Copyright designs and designs made by famous makers should not be documented unless they are available through your store.
State the date the replacement cost estimate applies and the date the item was examined. If you sold the item, the date of the sale should be stated.
Give a description of the item sufficient to replace, repair or identify it after a loss. (See “Descriptive Guidelines” and “Descriptive Guidelines Checklist.”)
Describe the condition and note any damage, particularly damage that might threaten durability or lead to the loss of the item or any of its components.
Sign the documentation.
All preparers of insurance documentation should aspire to provide the most complete description possible, as this is the single most important source of problems for insurance companies and their clients. Omission of any important element can seriously affect the quality of any eventual replacement, as well as the identification or reproduction of the item if there is a loss. Quality, condition, relative value or importance, and anticipated method of replacement are some of the factors that must be considered in deciding what constitutes an adequate description.
In some cases, identification, treatment or some other quality factor cannot be reasonably determined without damaging the item. At other times, the amount of effort required to determine such factors as metal fineness and gemstone identity, grade or origin is not justified by their potential effect on replacement cost. When it is reasonable and warranted, the preparer may assume these things to be as they appear or as they are represented to be, but any such assumption, the reason it was made and its potential impact on replacement cost should be stated prominently.
Any damage or wear affecting durability should be noted. In particular, note any conditions such as missing prongs, broken clasps, chipped or fractured gemstones or any other damage that threatens future durability and might contribute to a loss or partial loss. Most insurance policies contain an exclusion of risks due to such “inherent vice” in the articles insured.
Photographs are recommended. Scale should be indicated either in the photographs or by reference in the description. Disclose that the colors in the photographs are not necessarily accurate and that elements of quality and condition may not be visible. (See Appendix A.)
The Descriptive Elements Checklist that follows is intended to provide a partial list of those elements that are often important in the description of gemstones and jewelry.
Descriptive Elements Checklist
A general description of the style, motif, dimensions and type of item (medium weight solitaire ring, large cluster pendant, etc.) should be given.
Provenance and period should be stated (Art Deco, Victorian, l950s, etc.).
The name of an important designer or jewelry house should be specified.
The condition of the item should be described; the condition of component parts should be described separately when appropriate.
Metal color(s) and fineness should be stated, including a description of any stampings or markings.
The weight of the item should be stated. (Indicate inclusion or exclusion of component parts like gemstones, straps, etc.)
The apparent or known method of manufacture should be stated (cast, die-struck, handmade, etc.).
Copyrights, patents and trademarks should be described.
The name of the manufacturer should be stated if known or discoverable and any hallmarks should be described. If prepared by the seller, the manufacturer and style number should be disclosed, or alternatively, the store’s inventory number or both.
Serial numbers should be noted.
The natural or laboratory origin of gemstones should be disclosed. In the absence of sufficient gemological knowledge or equipment to make such determinations, and when significant, the services of a gemologist with the necessary knowledge and training should be secured.
All treatments and enhancements that are detectable by currently available gemological means (including oiling, heating, irradiation, laser drilling, coating, fracture filling, etc.) should be fully disclosed. The stability of any treatments noted should be indicated. If country of origin is known or determinable and affects replacement cost, it should be stated.
Diamonds and colored stones should be graded and described using published systems and nomenclature generally understood by members of the trade and generally accessible to members of the trade and the public. The system used should be stated.
As appropriate, gemstones should be described in terms of their shape, color, clarity, cutting quality, measurements and actual or estimated carat weight.
Gemstones with significant impact on replacement cost should be individually described. A plot or photomicrograph is recommended.
Gemstones with less impact on replacement cost can be described in groups by stating the range of size and quality and an estimate of the total weight of the group.
The character and quality of the phenomena in phenomenal gemstones should be described.
“Boilerplate” paragraphs prepared in an effort to abdicate all responsibility (like those often found as small print on preprinted “Appraisal” certificates) should be avoided. Each estimate of replacement cost should contain a signed certification similar in content to the following:
I certify that to the best of my knowledge and belief:
· The statements in this document are true and correct, including representations of quality and quantity.
· I have made a personal inspection of the property unless otherwise stated. (If more than one person signs the document, it should be clearly stated which of them made personal inspection of the property.)
· Although neither my compensation nor the consummation of any sale is contingent upon the reporting of any predetermined replacement cost, this document may have been provided as evidence of the quality of a purchase made from [NAME] Jewelers
· Unless otherwise stated, the subject property was sold by [NAME] Jewelers and the replacement cost stated is the actual price paid. In any case, the replacement cost estimate is the most common actual sales price of the same, identical or fully comparable property if sold by [NAME] Jewelers at this time.
· I am competent to identify and determine the relative quality of the subject property, which is within the range of properties normally bought and sold by [NAME] Jewelers. All significant characteristics affecting the replacement cost have been reported.
· Every effort has been made to grade any gemstones described in this document as accurately as possible within normal, reasonable and acceptable gemological ranges. Opinions of quality and grade may vary upon reexamination or examination by another qualified grader.
· Every effort has been made to determine the metal identity and fineness of any mountings described in this document as accurately as possible without the use of damaging tests.
· This document has been prepared in conformity with the Recommended Minimum Guidelines for Insurance Replacement Cost Documentation as published by the Jewelers Vigilance Committee Inc.
[Seller/preparer’s name and title]
Note: It is the content of the certification that is important, not the exact wording or format. This certification can be adapted to the preparer’s preferred document style provided the meaning and intent are retained.
APPENDIX A: SAMPLE DISCLOSURE STATEMENTS
Disclosure statements should always be made in a positive manner. When done properly, they demonstrate your care and professionalism and assure your customer that to you, their welfare comes first. Some sample disclosure statements follow:
Reporting the Actual Price Paid
It is the opinion of the JVC ATF that the actual price paid should always be stated in insurance documentation that has been prepared by a seller for use by the purchaser of the item:
“This ring was sold during our semiannual inventory reduction sale for $800. Our usual actual selling price is $l,000. Replacement cost through XYZ Jewelers is $1,000.”
“Mr. Smith is our frequent and valued customer and received a special price consideration from XYZ Jewelers in purchasing this ring for only $800. Unfortunately, we are not always able to offer such considerations and our most common actual selling price for this ring is $1,000. Replacement cost through XYZ Jewelers is $1,000.”
“This ring was sold by XYZ Jewelers for $800. Due to the current cost of restocking the ring through our usual supplier, it could not currently be replaced for that amount. Our actual selling price would, of necessity, be adjusted to reflect our higher wholesale cost. Replacement cost through XYZ Jewelers is now $1,000.”
“Although Mr. Smith just purchased this ring for $1,000 from XYZ Jewelers, it was a special-order design. A wax model had to be specially handcarved and fitted to Mr. Smith’s gemstones. Since XYZ Jewelers retains the pattern for this one-of-a-kind item in our files, much of the handwork necessary to provide a replacement would not be needed. For this reason, XYZ Jewelers could provide an identical replacement at this time for only $800. Notice to the insurance adjuster: This design (#TlO001) is copyrighted by XYZ Jewelers and any attempt to replace it through reproduction elsewhere may result in legal action.”
There are a few times when the actual price paid need not be stated. There is no need to disclose actual selling price if the item was sold, for example, to an insurance company for use in replacing a lost item. The insurance company was not dealing in the retail market and the price it paid has no relevance to the insurance contract. Omission of the price paid by the insurance company, therefore, would not be considered as withholding a material fact. It should be disclosed, however, that the insurance company was the actual purchaser and that the replacement cost stated reflects the insured’s cost of replacement through the seller’s store. For example:
“This ring was purchased by Acme Insurance Company as a replacement for one previously owned by Mr. Smith. The replacement cost stated represents Mr. Smith’s current cost of replacement through XYZ Jewelers. Acme Insurance paid a different amount based on standing agreements between Acme Insurance and XYZ Jewelers. Replacement cost through XYZ Jewelers is $1,000.”
It may also be deemed acceptable to merely report the existence of a discrepancy between the actual selling price and reported replacement cost in cases where the item was purchased as a gift and the purchaser does not wish the actual sales price to be disclosed to the recipient. In this case, confidentiality takes precedence and the existence of a discrepancy can be disclosed without stating the actual amount of the difference. Use caution in doing this, however, as this situation should not be used as an excuse to puff or inflate the value. The replacement cost stated should still be the most common actual selling price for the item in the preparer’s store:
“This ring was purchased from XYZ Jewelers by Mr. Jones as a gift for Mr. Smith. Due to the current cost of restocking the ring through our usual supplier, it would not currently be replaced for the amount paid by Mr. Jones. Our actual selling price would, of necessity, be adjusted to reflect the changes in our wholesale cost. Replacement cost through XYZ Jewelers is now $1,000.”
Disclosing Reliance on the Representations of Others
Reliance on representations of quality or quantity made by others, such as gemological laboratories, manufacturers or suppliers, must be disclosed. Here are some examples:
“The quality and total carat weight of the diamonds in this tennis bracelet are stated as represented by the manufacturer, MANUFACTURER’S NAME (SERIAL #). We believe these representations are accurate, and it would be impractical to remove the diamonds for weighing and keener grading.”
“This replacement cost estimate for this diamond was based on the qualitative information presented in Some Gemological Laboratory (SGL) Report #XXXXX dated ____.” Therefore, we limited our inspection to verification that the diamond is the one described in that report.”
Disclosing Acceptable Ranges of Accuracy in Grading
To protect yourself from claims of misrepresentation, it is important to disclose that gemstone grading is done subject to an acceptable range of accuracy. This does not relieve the preparer from using due care nor excuse instances of gross error or deliberate misrepresentation.
“Every effort has been made to grade the gemstones described in this document as accurately as possible within normal and reasonable gemological ranges. Legitimate opinions of quality and grade may vary upon reexamination or examination by another qualified gemologist.”
“Mounted diamonds can be graded only to the extent permitted by the mounting, and an accurate determination of grades and measurements may be prevented by certain types of mountings. Different types of settings have various impacts on grading accuracy. In addition, some grades are more easily distinguished than others when mounted. Unless otherwise stated, the carat weight of mounted gemstones was determined or confirmed by measurement and volumetric formula and should be accurate within accepted limitations of that method. Unmounted gemstones are physically weighed, allowing much greater accuracy.”
Disclosing the Accuracy of Photographs
To avoid misinterpretation and possible allegations of misrepresentation, the shortcomings of photographic representations should be disclosed.
“The photographs included serve to document design and general appearance and are not necessarily accurate reproductions of scale, color, quality or condition.”
APPENDIX B: SOURCES OF APPRAISAL TRAINING AND INFORMATION
The JVC ATF recommends that every preparer of insurance documentation obtain more information about the preparation of appraisals and the developing appraisal profession. The organizations and companies listed below publish information and/or offer classes in the appraisal of gemstones and jewelry. This list is not all inclusive and should not be considered as an endorsement by the JVC. Those seeking additional training and information should carefully investigate the various sources available to them to determine which will best serve their particular needs.
American Gem Society, 8881 W.Sahara Ave., Las Vegas, Nev. 89117; (702) 225-6500.
American Society of Appraisers, P.O. Box 17265, Washington, D.C. 20041; (703) 478-2228 or (800) ASA-VALU.
Appraisal Foundation, 1029 Vermont Ave. N.W., Suite 900, Washington, D.C. 20005; (202) 347-7722, fax (202) 347-7727.
Appraisal Information Services, l578 E. 21 St., Brooklyn, N.Y. 11210-5036 ; (718) 692-1975, fax (718) 692-3720.
Appraisers Association of America, 60 E. 42 St., Suite 2505, New York, N.Y. 10165; (212) 867-9775, fax (212) 599-1128.
Gemological Institute of America, 1660 Stewart St., Santa Monica, Cal. 90407; (800) 421-7250, fax (310) 453-7674.
Gemological Appraisal Association, 658 Washington Rd., Pittsburgh, Pa. 15228; (412) 343-5500, fax (412) 344-49l0.
International Society of Appraisers, Riverview Plaza Office Park, Suite 320, 16040 Christensen Rd., Seattle, Wash. 98188; (206) 241-0395, fax (206) 241-0436.
Master Valuer Program, P.O. Box 1844, Pearland, Tex. 77588; (713) 485-1606, telephone and fax.
National Association of Jewelry Appraisers, P O. Box 6558, Annapolis, Md. 21401-0558; (301) 261-8270 (call first for fax).
CONTRIBUTING MEMBERS OF THE JVC ATF
Harold Tivol (chairman), Tivol Plaza Inc.
Michael Allbritton, Gemological Institute of America.
David Atlas, D. Atlas & Co.
Cos Altobelli, Altobelli Jewelers.
Cap Beesley, American Gem Laboratories.
Barrie D. Birks, Tryingham Investments Ltd.
Loretta Castoro, Tiffany & Co.
Neil Cohen, M.B.A. Associates.
Jerry Ehrenwald, International Gemological Info.
Dennis Foltz, Gemological Institute of America.
Patti Geolat, Geolat & Associates.
Al Gilbertson, Gem Profiles.
Judy Garlock, Jewelers Mutual.
Tom Gorman, J.C. Keppie Co.
Robert Green, Lux Bond & Green.
Ron Harder, Jewelers Mutual.
Martin Haske, Adamas Gemological Laboratory.
Beth Hori, Gemological Institute of America.
John Hummel, Gemological Institute of America.
John Jaeger, State Farm.
James Jolliff, National Association of Jewelry Appraisers.
Ralph Joseph, Sherman & Sons.
Gail Levine, Auction Market Resource.
Paul MacBeth, MacBeth Ltd.
Janice Mack-Talcott, Gemological Institute of America (she has since moved to the AmericanGemSociety).
Frank Maier, Maier & Berkele.
Danusia Niklewicz, Paradise & Associates.
Donald Palmieri, Gemological Appraisal Association lnc.
Larry Phillips, Phillips & Associates.
William Preston Jr., F.J. Preston & Sons.
Michael D. Roman, Jewelers of America.
Elly Rosen, Appraisal Information Service.
David Craig Rotenberg, David Craig Jeweler.
Nancy Stacy, Jewels by Stacy.
Carl Schmieder, Schmieder & Son Jewelers.
Peter Schneirla, Precious Gem Resources.
Abe Sherman, Sherman & Sons.
Tom Tivol, Tivol Plaza Inc.
Thomas Underwood, Quantum Leap Software Products.
William Underwood, Underwood’s Fine Jewelers.
Joel Windman, Jewelers Vigilance Committee.