On Guard Against Fraud
Enhancing the Stone — diamond camouflage and how to see through it
Diamond enhancements are treatments done to improve the appearance of the stone. Don’t be fooled into thinking they improve the value of the diamond.
Jewelry fraud can be either blatant or subtle. Blatant fraud is the kind that makes the papers, like a retailer selling CZ and calling it diamond.
But there are subtler frauds — omissions, small exaggerations, little slippages, some “flexibility” in grading. In tight economic times, otherwise ethical gem suppliers, jewelers or policyholders may be tempted to resort to small deceptions to make a sale or increase a settlement. Now it’s more important than ever for insurers to be alert to little things that can have a huge effect at settlement time.
One area of deception that can prove expensive for insurers involves diamond enhancements that mask, or camouflage, the low quality of a diamond. Making a diamond look good is not a bad thing in itself. But insurers as well as buyers can be victims if the treatments are not disclosed and if insurers do not understand the significance of the treatments.
These are the most common treatments that should be disclosed:
| Treatment | Why is it done? | So What’s the Problem? |
| Laser Drilling A laser is used to drill a small channel in the stone to remove or bleach some inclusion of foreign material. |
The inclusion is removed or disguised and the diamond appears cleaner (though the channel is visible to a gemologist using proper equipment). | 1. The channel makes the stone less strong and more vulnerable to chipping. Think of it as inherent vice. 2. Laser-drilled diamond is worth less than non-drilled stone of similar appearance. |
| Fracture Filling Fracture in the stone is filled with some foreign material. | Fracture becomes less visible to the naked eye (though still detectible by gemologist using proper lab equipment). | 1. Fracture is still present, and it weakens the stone. Some say this is an accident waiting to happen. 2. Fracture-filled diamond is worth less than non-filled diamond of similar appearance. 3. The filling may not be permanent. A severely fractured stone could literally fall to pieces if the filling fails. |
| Color Enhancement. An off-color diamond is treated so it takes on a strong color, such as blue or green |
Strong-colored diamond is often more attractive than the yellowish or brownish diamond it was originally. | 1. Technologies are so advanced that treated diamonds could pass as natural fancies, with even retailers being fooled and overcharged. 2. Natural fancies have a MUCH higher value than color-treated stones. 3. Detection of some treatments requires testing with instruments beyond what would be found in the average jeweler’s lab. 4. Some sellers feel HPHT enhancement is a process, rather than a treatment requiring disclosure. |
Enhancements make a diamond look better and therefore more salable for the retailer. They put good-looking gems within the price range of buyers who couldn’t afford a high-quality diamond, especially a colored diamond.
Notice that enhancements benefit the seller and the buyer. The insurer — who, after all, is concerned only with valuation — must look out for his own interests.
Disclosure of enhancements on the appraisal is essential because:
- Enhancements lower the value of a diamond. A buyer might be led to believe an enhanced diamond is comparable in value to an untreated diamond of similar appearance, but that is not the case.
This is especially true for fancy colored diamonds, as natural fancies have many times the value of color-treated fancies.
- Some treatments are not permanent. A buyer may not be informed of this or may not understand the consequences.
If a fracture filling deteriorates, the fracture will reappear. This is due to inherent vice and is not “damage” for which the insurer is liable.
Color-treated diamonds can be affected by various conditions. For example, color produced by irradiation may change if the stone is subjected to high heat, as from a jeweler’s torch. Such a change is not “damage” for which the insurer is liable.
- Enhancement can disguise a flaw but not eliminate it.
Filling a fracture with foreign material does not make the stone solid diamond.
- If treatments are not disclosed, a settlement could result in gross overpayment.
A diamond could break because a fracture filling failed. If the treatment were not disclosed, the insurer could pay a claim that wasn’t an insured loss at all—just a treatment that vaporized!
FOR AGENTS & UNDERWRITERS
The best way to avoid being victimized by enhanced diamonds is to have an appraisal that describes the diamond in detail, including any treatments. If the diamond is untreated, the appraisal should explicitly say so.
Bear in mind that some color-enhancements can be detected only by a trained gemologist using equipment beyond that found in the average jeweler’s lab.
The most reliable appraisal is JISO 78/79, written by a Graduate Gemologist (GG) who is also a Certified Insurance Appraiser (CIA)™.
Always insist on two appraisals (or a gem report from a reputable lab) when insuring high-value diamonds, especially fancies. At least one appraisal should be written by a jeweler who is a GG and a CIA.
Any high-value diamond, especially one being insured as a natural fancy, should have a diamond report from a reliable lab. (The next issue of JII will discuss guarding against fraud in lab reports.)
FOR ADJUSTERS
Scrutinize the appraisal and other documents to be sure a diamond is untreated:
- Check the appraisal for words that signify treatments.
- Does the appraisal say the stone is untreated? Don’t assume it’s untreated just because no treatments are mentioned.
- Is the appraisal detailed? Use JISO 18 to see if all info is given.
- Pay attention to mention of laser inscription on the gem. Companies that sell enhanced or synthesized stones often inscribe their name on the girdle.
- Do the appraisal or other documents use any brand names? If you don’t recognize a name, consult a jewelry insurance professional.
- Is the valuation well above the purchase price? This is a red flag which may indicate that the stone is treated (or is synthetic, or that the valuation is inflated). Use every means possible to determine the true quality and valuation of the jewelry, to avoid very costly overpayment.
For damage claims, always have the jewelry inspected in a gem lab by a Graduate Gemologist (hired by the insurer) to verify the quality of the gem and determine whether it has been treated. Treated gems are not worth as much as untreated ones, and treatments that fail are not damage for which the insurer is liable.
©2009, JCRS Inland Marine Solutions, Inc. All Rights Reserved. www.jcrs.com
©2010, JCRS Inland Marine Solutions, Inc. All Rights Reserved. www.jcrs.com
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