May 2011

JEWELRY INSURANCE ISSUES (formerly IM News), provides monthly insight and information for jewelry insurance agents, underwriters and claims adjusters.

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Jewelry Insurance Issues

Table of Contents

Click on article titles in red

2017

Moral Hazard, Documents and the Bottom Line - January

Ruby and Jade - February

How to mail a diamond - March

Jewelry Insurance Appraisal Standards: JISO - April

Describing a gem's color - May

Why not just put jewelry on the Homeowner policy? - June

2016

Inflated appraisals—alive & well! Shady lab reports—alive & well! MORAL HAZARD—ALIVE & WELL! - January

Clarity Enhancements v. Inherent Vice - February

How green is my emerald? - March

Cruise Jewelry - What's the problem? - April

Crown of Light®- how special is it? - May

Diamonds at Auction — Big gems, big prices, and the trickle-down effect - June

Are you sure her wedding jewelry is covered? - July

What Affects Jewelry Valuation? - August

What to look for – on the jewelry appraisal, on the cert, and on other documents - September

Bigger & Bigger Diamonds - October

Scam season is always NOW - November

Ocean Diamonds - December

2015

Pair & Set Jewelry Claims and the Accidental Tourist - January

Is that brand-name diamond a cut above the others? - February

Vacation Jewelry – Insurer beware! - March

Apple's Smartwatch – The risk of a wrist computer - April

Why you should read that appraisal - May

Smoking Gun! - June

Color-Grading Diamond: the Master Stones - July

Padparadscha—a special term for a special stone - August

Jewelry Appraisal Fees - September

Insuring a Rolex - steps to take, things to consider - October

Diamond camouflage and how to see through it - November

GIA Hacked! - December

2014

Who Grades? - January

Sales, discounts, price reductions, bargains, specials, mark-downs . . . . and valuation - February

Credential Conundrum - March

Frankenwatches - April

Fakes, fakes, and more fakes - May

Marketing Confusion — What is this gem anyway? - June

12 Reasons Not to Insure a Rolex! - July

Why NOT to insure a Rolex: Reasons 5-7 - August

Why NOT to insure a Rolex: Reasons 8-10 - September

Why NOT to insure a Rolex: Reasons 11-12 - October

The Doublet Masquerade - November

Is the gem suitable for the jewelry? Is this a good insurance risk? - December

2013

Wedding Rings on HO? NO! - January

Silver: the new gold - February

Point Protection - March

Tiffany v. Costco - April

What counts in valuing a diamond? - May

Appraising Jewelry - What's a credential worth? - June

A Cutting Question concerning vintage diamonds - July

Synthesized Diamonds - Scam update - August

Pretty in Pink - Kunzite on parade... - September

Preventing jewelry losses - October

Scratch a diamond and you'll find . . .??? - November

Synthetics in the Mix - December

2012

Advanced Gem Lab - A deeper look at colored gems - January

Whose Diamond? - February

Appraisal Inflation - It Keeps On Keeping On - March

Big Emerald - April

Changing colors and making gems: Are we seeing "beautiful lies"? - May

Diamonds - Out of Africa. . . or out of a lab? - June

Appraiser's Dream Contest - July

GIA & the Magic of Certificates - August

Pricey when it's hot: What happens when it's not? - September

Fooling With Gold - October

Tanzanite – December's stone - November

Branding Diamonds - What do those names mean? - December

2011

Unappraisable Jewelry - January

Replicas - Are they the real thing? - February

Composite Rubies- From bad to worse - March

Jewelry Hallmark - A Well-Kept Secret - April

Non-Disclosure: Following a Trail of Deception - May

Preserving the Diamond Dream - June

Spinel in the Spotlight - July

Jewelry 24/7 - Electronic Shopping - August

Diamond Bubble? - September

Disclosure: HPHT - October

"Hearts & Arrows" Diamonds - November

How a Gem Lab Looks at Diamonds - December

2010

Emeralds - And What They Include - January

Pink Diamonds: From Astronomical to Affordable - February

Palladium-the Other Precious White Metal - March

Bridal Jewelry - April

The Corundum Spectrum - May

How Photos Cut Fraud - and help the insured - June

The Price of Fad - July

Old Cut, New Cut-It's All about Diamonds - August

EightStar Diamonds-Beyond Ideal - September

The Hazard of Fakes - October

Jewelry with a Story - November

Counterfeit Watches - December

2009

Blue Diamond-cool, rare and expensive-sometimes - January

Turning Jewelry into Cash—
Strategy in a Bad Economy
- February

Enhancing the Stone - March

Being Certain about the Cert - April

Every Picture Tells a Story - May

Color-Grading Diamonds - June

The Newest Diamond Substitute - July

What Happens to Stolen Jewelry - August

Jewelry As an Investment - September

Black Diamond: Paradox of a Gem - October

Protect Your Homeowners Market—Keep Jewelry OFF HO Policies! - November

What’s So Great about JISO Appraisal Forms & Standards? - December

2008

Garnet - and Its Many Incarnations - January

Organic Gems - February

Do Your Jewelry Insurance Settlements Make You Look Bad? - March

Don't Be Duped by Fake JISO Appraisal - April

Diamonds in the Rough - May

The Cultured Club - June

Sapphire-Gem Superstar - July

It's a Certified Diamond! 
- But who's saying so?
- August

FTC Decides: Culture Is In! - September

Paraiba Tourmaline – What's in a Name? - October

How Fancy is Brown? - November

CZ – The Great Pretender - December

2007

Moissanite's New Spin - January

Online Jewelry - Buying and Insuring - February

Blood Diamonds - March

Damaged Jewelry, Don't Assume!- April

Chocolate Pearls - May

Appraisal Puff-Up vs Useful Appraisal - June

It's Art, but is it Jewelry?
- July

Diamonds Wear Coats of Many Colors - August

DANGER! eBay Jewelry "Bargains" - September

TV Shopping for Jewelry - October

Enhanced Emerald: clever coverup - November

How do you like your rubies -
leaded or unleaded?
- December

2006

The New Platinum: A Story of Alloys - January

Ruby Ruse - February

How Big are Diamonds Anyway? - March

GIA Diamond Scandal
Has Silver Lining for Insurers
- April

Watch Out for Big-Box Retailers Insurance Appraisals - May

Mixing It Up: Natural and Synthetic Diamonds Together - June

Tanzanite - Warning: Fragile - July

Red Diamonds - August

Inflated Valuations & Questionable Certificates - September

Emeralds - October

Where Do Real Diamonds Come From? - November

Counterfeit Watches - The Mushroom War - December

2005

The Lure of Colored Diamonds - January

Synthetic Colored Diamonds - February

Watches: What to Watch for - March

When is a Pear not a Pair? - April

The Truth About Topaz - May

White Gold: How White is White? - June

One of a Kind - or Not - July

Jewelry in Disguise - August

Valued Contract for Jewelry? Proceed with Caution! - September

Antiques, Replicas and All Their Cousins
October

Grading the Color of Colored Diamonds
November

New GIA Cut Grade for Diamonds - December

2004

Synthetic Diamonds - and Insuring Tips - January

Bogus Appraisals and Fraud - February

A Picture is Worth Thousands of Dollars - March

Don't be Duped by Fracture Filling - April

Gem Scams Point to Need for Change - May

What is a Good Appraisal - June

4Cs of Color Gemstones - July

Gem Laser Drilling: The Next Generation - August

Why Update an Appraisal? - September

When to Recommend an Appraisal Update or a Second Appraisal - October

Secrets of Sapphire - November

Will the Real Ruby Please Stand Up - December

2003

Mysterious Orient:
A Tale of Loss
- January

Bogus Diamond Certificates and Appraisals - February

Can Valuations be Trusted? - March

Spotting a Bogus Appraisal or Certificate - April

Counterfeit Diamond Certificates - May

Case of the Mysterious "Rare" Sapphires - June

Politically Correct Diamonds - July

Name Brand Diamonds - September

Princess Cut: Black Sheep of Diamonds - October

Reincarnate as a Diamond - November

Synthetic Diamonds - December

2002

Irradiated Mail/Irradiated Gems - January

Fake Diamonds (Moissonite) - February

GIA Diamond Report - March

AGS and Other Diamond Certificates - April

Colored Stone Certificates - May

Damaged Jewelry: Don't Pay for Nature's Mistakes - June

The Case of the "Self-Healing" Emerald - July

Mysterious Disappearance: Case of the Missing Opals - August

The Discount Mirage - September

What Can You Learn from Salvage? - October

Gaining from Partial Loss - November

Year in Review - December

2001

Colored Diamonds - January

Good as Gold - February

Disclose Gem Treatments - March

FTC Jewelry Guidelines - April

Myths Part I: Each Piece is Unique - May

Myths Part II: Myths, Lies, & Half-Truths - June

New Trend: Old Cut Stones - October

The Appraisal Process - November

Year in Review - December

2000

Deceptive Pricing - January

Gems - Natural or Manmade - February

Jeweler/Appraisal Credentials - March

Fracture Filling - April

Salvage Jewelery - May

Gem Treatments - June

Don't Ask/Don't Tell - A Buying Nightmare - July

Laser Drilling of Diamonds - August

Jeweler Ethics or the Lack Thereof - September

Gem Scam - October

The Truth about Clarity Grading - November

Year in Review - December

 

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Non-Disclosure:
Following a Trail of Deception

The jewelry to be insured was a lady’s diamond wedding set, with a valuation of $18,900.  A Certificate of Authenticity, including a picture, arrived with the policy application. Most insurers would regard this as a pretty straightforward matter and simply insure the rings for $18,900.

The insurer who received this particular application declined coverage. To discover why, follow along as we check the docs to see what they reveal.

Certificate of Authenticity

This is a wallet-size card with basic descriptive information about the jewelry. The word “Excellent” occurs a couple of times, and the estimated retail price is given as $18,900.

Suspicious: Although specific gem grades may not have much meaning for an agent or underwriter, what should arouse suspicion is that little asterisk after the Clarity grade SI1* — because there is no explanation for the asterisk.

Suspicious: Who issued this card, who declares these details are true? Who is EB? We’ll find out.

 

Appraisal Report

Appraisal ReportThe insurer requested an independent appraisal, and this Appraisal Report was submitted.

Suspicious:  An appraisal should be addressed to the person requesting it, but this report is not addressed to anyone. The industry is thick with “canned” appraisals, prepared in quantity, to accompany a type of jewelry. It is possible (likely?) that this particular piece was never examined in a gem lab.

Suspicious: Who is AGI? This looks something like a lab report, but it is not from a well-known lab recognized as reputable. Also, an independent lab only describes quality, not market value.

Suspicious: This report is dated one day after the invoice/sale date, so presumably it was sent by the seller. The question arises: is AGI owned by the seller? What is their business relationship?

The Appraisal Report has a little more information than the Authenticity card; for example it describes the small diamonds. AND it explains the asterisk next to the Clarity grade: the center gem is clarity enhanced.

Suspicious: This disclosure of a clarity treatment, given in very tiny type, should be LOUD AND BOLD because it greatly affects valuation. (More about valuation below.)

Suspicious: Disclosing the clarity treatment only here is very misleading. Was the buyer told at time of sale that the stone was treated, and was he told what that means? The document originally submitted to the insurer did not contain this important valuation information.

 

Invoice/Sales Receipt

Insurers who don’t require sales receipts on new purchases miss some important clues to problematic issues.

Suspicious: Because the buyer lived a great distance from the seller (client’s privacy protected in these illustrations), the insurer suspected this was an internet purchase. Indeed, it turned out the purchase was through eBay.  Please check out our earlier issue, where we discussed cautions about eBay purchases in some detail.

Suspicious: After the item’s description is the phrase “Non-Refundable.” Printed text at the bottom says “7 Days Money Back Guarantee.” Aside from the obvious contradiction, even 7 days is not a sufficient time to receive the jewelry by mail, get it appraised by an independent Graduate Gemologist, and then return it if it’s not of the stated quality. A miserly return policy is a red flag, and a no-refund policy for expensive unseen merchandise is inexcusable.

Suspicious: ExtraBrilliant, the seller, is also EB, the issuer on the Certificate of Authenticity (with its unexplained asterisk), so the Cert is not a supporting document from a separate source.

A link from ExtraBrilliant’s eBay website allows a buyer to purchase for $60 “a third-party certificate,” – which is the Appraisal Report above. So this document also came through the seller.

As we have cautioned many times, do not take at face value reports and similar documents provided by the seller. Always ask for an appraisal by an independent Graduate Gemologist who examines the piece in a gem lab.

Suspicious:The Appraisal Report carried a valuation of $19,500 – higher even than the seller’s Certificate of Authenticity. But looking at the invoice, we find that the buyer paid only $6,500. It is hardly credible that a retailer would sell an article for one-third its retail value.

This immense value discrepancy suggests either that the qualities of the piece are exaggerated or that the valuation is grossly inflated.

About clarity enhancement

So we turn again to that asterisk next to the Clarity grade, denoting that the diamond is clarity enhanced. The seller discusses clarity enhancement on its website, inventing the term “feather filling” instead of using the common term, fracture filling.

The seller’s discussion says that this treatment makes the diamond “more visually appealing, which also increase[s] the value of the stone.” Not true! It would be more accurate to say the treatment makes a low-quality stone more marketable, but not more valuable.

So what is it really worth?

The insurer’s ITV (insurance to value) calculation for a natural untreated diamond of the stated qualities came to $17,935, which is very close to the seller’s declared valuation. However, a similar diamond that is clarity enhanced probably is actually of I2 or I3 clarity. It turns out that a diamond of that clarity is worth about the $6,500 the buyer paid.

So the buyer got what he paid for.

What about the valuation discrepancy?

Was the buyer deceived? The clarity enhancement wasn’t mentioned on the sales receipt or the Cert of Authenticity. It’s possible the buyer wasn’t told at all. The fact that this important disclosure was very tiny on the Appraisal Report suggests some degree of collusion between the seller and the provider of the Appraisal Report.

What if an insurer had simply accepted the $18,900 valuation? Insuring jewelry for three times its value creates a moral hazard, and it opens the insurer to adverse claim costs.

Some important points to come away with:

This is not a unique case. This kind of deception is rampant.

FOR AGENTS & UNDERWRITERS

All scheduled jewelry should have an appraisal from a Graduate Gemologist (GG) preferably a Certified Insurance Appraiser™.

An appraisal should be addressed to the owner/buyer of the jewelry. One that does not name the recipient is probably a “canned” document supplied by the seller.

The reliability of a lab report depends on who issues it. We recommend relying on reports only from these reputable labs:

GIA (Gemological Institute of America)
AGS Lab (American Gem Society Lab)
GCAL (Gem Certification & Assurance Lab)

Be especially wary of purchases made online. Be sure documents include an appraisal from an independent GG (not just documents obtained through the seller).

Please review our earlier issue of JII, where we discussed cautions about eBay purchases in some detail. You may also want to recommend that newsletter to your policyholders.

For new purchases, ask for the sales receipt. Compare selling price with valuation; a large discrepancy suggests an inflated appraisal.

FOR ADJUSTERS

Though enhancement sounds like a good thing, it may signal deception. Enhancements are treatments that improve the appearance of a gem, not its quality or value.

Check all documents for terms like enhancement, treatment, color-treated, clarity-treated, fracture-filled, feather-filled, laser drilled, irradiated, etc.

If the appraisal or other documents contain any terms you don’t understand, consider consulting a jewelry insurance specialist before settling a large claim.

If the sales receipt is available, be sure to compare the purchase price with the valuation; the purchase price is likely to be closer to true valuation. Compare all documents for qualities.

 

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