Return to APPRAISAL CORNERPREFACE
by Joel A. Windman, JVC Executive VP and General Counsel
Jewelers Vigilance Committee, Inc.
Appraisal Task Force (ATF)
CAUTION: 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, Appraisal Task Force Members and/or anyone else connected with this publication disclaims any and all liability that might arise from its useas these are guidelines only and users must be certain their knowledge, trainingand ability are capable of meeting all challenges that might occur. Cost estimates given by jewelers on jewelry they did not sell is a mine field. Completeagreement was not reached by JVC's Appraisal Task Force members regarding jewelersgiving cost estimates on items they did not sell. Extreme caution must be exercised.Examples might be from the most simplistic jewelry to rare gemstones such as fancycolor diamonds, alexandrites, etc. one-of-a-kind hand made pieces, designer jewelry,antique, and/or anything not sold by your store. A summary checklist of Statements and Disclosures as well as a checklist of DescriptiveElements may be found [in] these Recommendations. JVC members are urged to photostat those checklists for use by their staff.
Jewelers Vigilance Committee, Inc.
Appraisal Task Force
Recommended Minimum Guidelines for Insurance Replacement Cost Estimate Documentationfor Jewelers
Version 1.5. September 1,1995
Published in the United States of America
© Copyright 1995
JEWELERS VIGILANCE COMMITTEE, INC.
401 East 34th Street, Suite N13A
New York, NY 10016-8578
All rights reserved.
This publication may be reproduced, stored in a retrieval system, or transmitted inany form or by any means, electronic, mechanical, photocopy, recording or otherwise,only if the publication is reproduced, stored or transmitted in its entire and original form or as subsequently amended by the JVC Appraisal Task Force and no one else;and that compensation received for such reproduction, storage or transmittal doesnot exceed the actual cost of reproduction, storage or transmittal. It may be includedas a part of any educational offering or publication provided it is included in its entireand original form or as subsequently amended by the JVC Appraisal Task Force andno one else. The permissions granted above apply to the current version only, whichsupersedes all previous versions.
TABLE OF CONTENTS
Insurance Documentation by the Seller as an Express Warranty
Representations of Replacement Cost
Legal Considerations and Supplemental Requirements
Recommended Statements and Disclosures
Statements and Disclosures Checklist
Descriptive Guidelines Checklist
Appendix A: Sample Disclosure Statements
Reporting the Actual Price Paid
Disclosing Reliance on the Representations of Others
Disclosing Subjectivity in Grading
Disclosing the Accuracy of Photographs
Appendix B: Sources of Appraisal Training and Information Contributing Members of the JVC ATF:
Harold Tivol, Chairman, Tivol Plaza, Inc.
Michael Albertan, GG, Gemological Institute of America
David Atlas, GG, ASA, NGJA, ASA-Master Gemologist Appraiser, D. Atlas & Co.
Cos Altobelli, CGA, Altobelli Jewelers
Cap Beesley, GG, ASA, ASA-Master Gemologist Appraiser, American Gem Laboratories
Barrie D. Birks, Tryingham Investments, Ltd.
Loretta Castoro, GG, Tiffany & Co.
Neil Cohen, GG, ASA, M.B.A. Associates
Jerry Ehrenwald, GG, ISA, ASA, NAJA International Gemological Institute
Dennis Foltz, GG, Gemological Institute of America
Patti Geolat, GG, ASA, Geolat & Associates
Al Gilbertson, GG, ISA, ICGA, Gem Profiles
Judy Garlock, Jeweler's Mutual
Tom Gorman, J. C. Keppie Co.
Robert Green, Lux Bond & Green
Ron Harder, Jeweler's Mutual
Martin Haske, GG, ISA, NGJA Adamas Gemological Laboratory
Beth Hori, GG, Gemological Institute of America
John Hummel, Phd, Gemological Institute of America
James Jolliff, GG, NGJA, National Association of Jewelry Appraisers
Ralph Joseph GG,ISA-CAPP, Sherman & Sons
Gail Levine, GG,ISA, Timeless, Inc
Paul MacBeth, MacBeth Ltd.
Janice Mack-Talcott,GG,Gemological Institute of America .
Frank Maier, Maier & Berkele
Danusia Niklewicz, GG,ISA,ASA, Paradise & Associates
Donald Palmieri, GG,ASA ASA Master Gemologist Appraiser, Gemological Appraisal Associates
Larry Phillips, GG,ASG,ISA,ASA, ASA Master Gemologist Appraiser, Phillips & Associates
William Preston, Jr, F.J. Preston & Sons
Michael D. Roman, Jewelers of America
Elly Rosen, Appraisal Information Services
David Craig Rottenberg GG,ISA, David Craig Jewelers
Nancy Stacy GG,ISA,ASA, ASA Master Gemologist Appraiser, Jewels by Stacy
Carl Schmieder CGA, Schmeider & Son, Jewelers
Peter Schneirla, Precious Gem Resources
Abe Shaerman GG, Sherman & Sons
Tom Tivol, Tivol Plaza, Inc
Thomas Underwood GG, ASA, ASA MAster Gemologist Appraiser, Quantum Leap Appraisal Software
William Underwood, Underwood's Fine Jewelers
Joel Windman, Jewelers Vigilance Committee
Foreword
The Jewelers Vigilance Committee (JVC) and its Appraisal Task Force (ATF) has 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 areintended as minimum requirements for providing an estimate of replacement cost forintended use in obtaining insurance, at the current actual selling prices of a particularestablishment 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 assuringfair insurance premiums and settlements.
The JVC ATF, having conducted a thorough study of the subject, recommends that anydocument 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 andis rapidly gaining acceptance as the minimum standard for all types of appraisals. The task force recommends that sellers provide an insurance replacement cost estimatein 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 appraisalfor 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 trainingis recommended in addition to familiarity with the metals and techniques of jewelrymanufacture. The item must be of a type and quality sold by the preparer, who mustbe able to provide an appropriate replacement for it.
Point of Sale Documentation as an Express Warranty
Documents providing descriptions and/or any representation of quality and/or valueto be used for the purpose of obtaining insurance and given by the seller at thepoint of sale have been interpreted as express warranties (guarantees), under theUniform 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 prominentlystated as subjective in any form of insurance replacement cost documentation. (SeeAppendix 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 buyershould clearly and prominently disclose any variance between the actual price paidand the estimated replacement cost, and the reason for the discrepancy should beexplained (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, pricesprior to discounts or manufacturer's recommended retail prices.
In the opinion of the JVC Appraisal Task Force, the preparation of any insurance documentation containing over stated 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 anypercentage or buffer against anticipated inflation to the estimate.
Proper Practice
Certain obligations and responsibilities are accepted by those preparing any typeof insurance documentation. Preparers of such documentation are holding themselvesout as experts, and the law holds experts to a higher degree of care. Preparersof insurance documentation bear full responsibility for content and accuracy. In the opinionof 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 law 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 partiessuch 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 anyjurisdiction, the JVC ATF recommends that preparers defer to such law or public policy.Insurers may have additional or supplemental requirements for documents to be usedby their agents and underwriters. In addition, organizations endorsing these JVC AppraisalTask 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 withthe 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 maybe the date of sale (if recent) or the date of examination. If the date of examinationis 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 likekind, 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 theitem, it is sometimes advisable to report more than one possible replacement cost.The circumstances pertaining to each insurance replacement cost estimate should beclearly explained. This gives customers and insurers the option to agree in advance,and may prevent future conflicts.
The Statements and Disclosures Checklist on the following page is intended to providea partial list of those elements that are often important in the description of gemstonesand 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 itscomponent parts?
Yes: State the methods used to determine the above, including any reliance on therepresentations of others, such as outside laboratories or gemologists, manufacturersand suppliers.
No: Do not provide documentation. If the item contains gemstones:
Include a statement disclosing the existence of an acceptable range of accuracy ingemstone grading (see Certification, page 8; and Appendix A). The limitations inherentin grading mounted gemstones should be explained if the gemstones are mounted unlessthey were graded and weighed prior to setting.
Disclose any assumptions made as to identity, quality or quantity of the item or anyof 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 withoutsomehow verifying identity, quality and quantity. (See Descriptive Guidelines, page 5).
Include a certification as described [in] these guidelines.
Some of the statements and disclosures elsewhere in this checklist can be coveredin a standard certification section. The words "unless otherwise stated," can beused 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 pricepaid?
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 pricepaid. (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 replacementfor it in the event of a loss. You are responsible for correct identification andevaluation 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 expertsmay be necessary. Copyrighted designs and designs made by famous makers should notbe 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 ofthe 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 threatendurability or lead to the loss of the item or any of its components Sign the documentation
Descriptive Guidelines
All preparers of insurance documentation should aspire to provide the most completedescription possible, as this is the single most important source of problems forinsurance companies and their clients. Omission of any important element can seriouslyaffect the quality of any eventual replacement, as well as the identification or reproductionof 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 reasonableand warranted, the preparer may assume these things to be as they appear or as theyare 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 conditionssuch 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 photographsor by reference in the description. Disclose that the colors in the photographs arenot necessarily accurate and that elements of quality and condition may not be visible.(See Appendix A: "Sample Disclosure Statements.")
The Descriptive Elements Checklist on the following page is intended to provide apartial list of those elements that are often important in the description of gemstonesand jewelry.
Descriptive Elements Checklist
A general description of the style, motif, dimensions and type of item (medium weightsolitaire ring, large cluster pendant, etc.) should be given.
Provenance and period should be stated (Art Deco, Victorian, 1950's, 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 stampingsor markings.
The weight of the item should be stated. (Indicate inclusion or exclusion of componentparts 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 alternately, the store's inventory number, or both.
Serial numbers should be noted.
The natural or laboratory origin of gemstones should be disclosed. In the absenceof sufficient gemological knowledge or equipment to make such determinations, andwhen significant, the services of a gemologist with the necessary knowledge and trainingshould be secured.
All treatments and enhancements that are detectable by currently available gemological means (including oiling, heating, irradiation, laser drilling, coating, fracturefilling, etc.) should be fully disclosed. The stability of any treatments noted shouldbe indicated. If country of origin is known or determinable and affects replacementcost, 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 withsignificant impact on replacement cost should be individually described. A plot orplot or photo 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.