January 2015

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

GIA Diamond Reports - July

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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Pair & Set Jewelry Claims and the Accidental Tourist

      

OK, not all partial loss jewelry claims happen on vacation but what if……

An earring is lost.
A fancy earring with a complicated setting is lost.
A stud is missing.
The center stone of a ring is lost.
A diamond in the ring is chipped.

Are such claims settled as total losses?

A jewelry industry publication recently carried an article explaining to appraisers how jewelry insurance works. It stated that, in most cases like those above, the insurer would settle the claim as a total loss and the client would then surrender to the insurer whatever remained of the jewelry.

A total loss settlement may be what jewelers and appraisers expect and want but it's not what most policies provide. In fact, quite the opposite, as can be seen below.

ISO's Personal Inland Marine Common Policy Provisions (PM 00 01 12 02) Loss To A Pair, Set Or Part (D1(3) states:

If the article or item is a pair or set or consists of several parts when complete, we may elect to:

(a) Repair or replace any part
to restore the pair or set to its value before the loss;

(b) Pay the difference between the actual cash value of the property before and after the loss; or

(c) Pay for the value of the part lost or damaged
.

 

In short, loss or damage to a pair or set does not require replacing the entire pair or set, or paying the limit of liability for the entire pair or set. In fact, several states have altered this language. Texas, for example, has eliminated the (b) option.

When "total loss"= Overpayment

Settling a lost earring as a total loss is an advantage to the jeweler (and the appraiser working with a jeweler), since that generally results in a new jewelry purchase (and new appraisal). But this is often an unintended betterment. Simply having the lost earring replaced is what the policy intended and it mitigates the loss.

If, as an insurer, total payouts on pair & sets have been your practice, you've been overpaying settlements.

Some examples from insurers' files (overpayments would likely be even higher today):

A claim was made on this ring for a lost stone. The insurer paid the full price of the ring, whereas the company could simply have had the stone replaced.
Overpayment: $2,656 ++?

 

A pearl earring was lost, and the selling jeweler said a mate could not be made. A glance at the picture shows a simple design that could easily have been duplicated. A mate could have been made for as little as $150, but the company paid the full limit of liability.
Overpayment: $1,100 ++?

 

One earring was lost. It had lots of small diamonds, but the picture shows a design that could easily be replicated, rather than paying out a total loss.
Overpayment: $4,206 ++?

 

In this case, the center stone on the ring was chipped. The company paid it as a total loss, but simply replacing the stone would be easy. Overpayment: $11,780 ++?

 

Jewelry's "uniqueness myth"

Consumers tend to believe their jewelry is unique. This impression is promoted by many jewelers and appraisers because it makes consumers feel good. And adjusters, regarding appraisers as the jewelry experts, often buy into the uniqueness myth as well.

Why did the jeweler who sold the pearl earrings above tell the adjuster that another could not be made? Surely not because that earring was unique and unmatchable. One assumes the reason was to be able to sell the customer a new pair (at the insurer's expense!).

The fact is that much jewelry comes from suppliers. Not only chain outlets like Jared's but also independent jewelers use these suppliers. Even a piece of jewelry that looks expensive and complicated can usually be duplicated. With one earring in hand, it should be easy to price a mate.

Replacing a damaged stone is also not difficult, since a gemologist can see the exact qualities of the original stone. Even if a stone is lost, a replacement can be made based on the description in the appraisal.

 

About Agreed Value

One result of the uniqueness myth is that jewelry sometimes gets written for Agreed Value.

There is very rarely reason to write jewelry as Agreed Value. The vast majority of jewelry is prior art, meaning a style that's been around for some time, so there are no copyright issues.

There are some exceptions. A necklace that belonged to the Duchess of Winsor would be a good candidate for Agreed Value, since provenance accounts for some of the jewelry's value. In very few cases a gem of substantial size or extraordinary quality may no longer be available, making that jewelry irreplaceable. But most jewelry—from Macy's or Zales or even from high-end jewelry stores—can easily be duplicated, and most stones can be replaced.

Obviously that's not the case with unique designer pieces, but there are a few of things to keep in mind about "designer" jewelry:

  1. Just because jewelry comes from a high-end store does not mean it's a designer piece.
  2. Gem jewelry derives much if not most of its value from the gem(s).
  3. Even in unique designer jewelry, the designer creates the setting but does not create the gems. In fact, large stones for the jewelry are usually selected by the jeweler. A diamond is chosen for its qualities (the 4 Cs), and it can be replaced by an insurer-sourced diamond of like quality.

Insureds should be warned that Agreed Value means higher premiums, and usually is beyond the coverage necessary.

 

FOR AGENTS & UNDERWRITERS

To avoid overpayment on a future claim, get the sales receipt and compare the price paid to the valuation on the appraisal.

If this practice reveals an appraiser who regularly writes grossly inflated valuations, you may choose to not accept appraisals from that appraiser.

It's your responsibility to remove moral hazard. Get a current picture of the jewelry to verify that the jewelry exists and is in the possession of the insured.

 

FOR ADJUSTERS

Review possible policy amendments to the Common Policy Provisions by your state and your company that may affect your settlement options.

Review all documents on file—appraisals, sales receipts, diamond reports. If some of these documents are lacking, ask the insured for them.

Comparing purchase price to the appraisal valuation is a useful way to avoid overpayment, as the price is a truer indication of market value than a possibly inflated valuation.

If sales receipt is missing, it can be obtained from the jeweler. The IRS requires that sales receipts be held for at least 3 years, and commercial insurance carriers require this as well. In truth, most jewelers rarely purge their files, so usually more years are available.

Have the customer go to the seller and ask for this information. Retailers will be reluctant to cooperate with you, the adjuster, but they are more likely to accommodate their customers.

For pair and set claims, have the surviving jewelry examined by a qualified gemologist (GG or FGA+) to verify that the quality of the gem and jewelry is as stated on the appraisal.

A mate can usually be made for a lost earring. Submit the surviving earring to price a replacement.

Avoid going to the selling jewelry for repair or replacement, as it is in his interest to sell a new piece rather than do a repair or make a mate.

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