Appraisers: Appraisal before Ring Finish

[DBM]

Probably discussed before but i couldn''t find it in searching.

I''d like to know from the appraisers and/or vendors out there how often you encounter appraisals made before the ring is finished. (the idea being the customer can walk out the store with confindence that it is already insured). Would you say that''s common practice?

Also, irrespective of what is or is not done, what is the official legal policy vis-a-vis the insurance company. Is it officially illegal to appraise a diamond ring in a mounting before the diamond has been set in the mounting?

Thank you all in advance

DBM

 

[Regular Guy]

Daniel,

Both Denver Appraiser and Jeweler's Mutual's friendly representative (eta...Sue Fritz) have mentioned this practice here more than once. Although I doubt it's frequently done, for those who mix and match vendors for diamonds & settings, it's probably recommended, and...they'll (JM) explicitly cover the piece during the setting process...making the first year for JM as the no-brainer insurance vendor of choice...at least within the right price point (not sure if they have an upper limit).

 

[denverappraiser]

Daniel,

As Ira mentioned, it’s pretty unusual although I’ve done a fair number of them for PS customers who have read the various discussions on this issue. Outside of Pricescope, few people think of it.

It works pretty well but it does require 2 appraisals, one for the planned ring and one for the completed item. To the best of my knowledge, Jewelers Mutual is the only company that is willing to accept an appraisal describing an item that does not yet exist and a plan for it’s creation as the basis for an insurance contract.

As far as the legality of it goes, there’s no problem. As long as the appraiser accurately reports what he/she did or did not inspect and reports it in a way that could not be construed by a ‘reasonable and prudent man’ as an intent to deceive then there is no particular problem with a hypothetical assumption like this. Other insurance companies will simply refuse to bind a policy on the basis of this type of appraisal. I’m reasonably confident that JM does it as a competitive issue because it results in long term customers for them. I wish them only the best at it. It’s a wonderful benefit to consumers, it’s a benefit to me and I hope it continues work out well for them.

This sort of reporting is very much like post-loss insurance appraising where property has been lost or destroyed and the client (usually an insurance company) is trying to estimate the value on an item that the appraiser can’t inspect.

Neil Beaty
GG(GIA) ICGA (AGS) NAJA
Professional Appraisers in Denver

 

[bosoxbw]

Hi...

Does that mean that if I am buying my stone from ERD and having the setting made/stone set by Leon Mege, I need to go through JM and get this insurance, at least for the first year? I use ERD''s appraisal for the first appraisal and then get it appraised again after the stone is set? Thanks!

 

[denverappraiser]

Many setters will not take liability for damage to a stone caused during setting. I believe Leon is an exception to this but you should ask him. This puts clients in the position of buying a diamond and being uninsured until the ring is completed and appraised.

Jewelers Mutual has started a special program to cover this situation. If you have the diamond appraised loose and submit a plan for the final ring, you will be insured as soon as the appraisal is submitted and the policy is accepted by their underwriters. If you have ERD ship it to one of the independent appraisers that they work with, the stone will be covered by ERD’s insurance while in transit to the appraiser, the Appraisers insurance while in their possession, and Jewelers Mutual while in the jeweler’s possession and for the ensuing year. There are several appraisers who can do this and deliver your appraisal electronically effectively leaving you with no gap at all. You are covered from the time the diamond vendor ships until you decide to cancel your policy with JM. Even if, for some reason, JM decides not to bind the policy, you are covered because the appraiser can ship back to ERD and it will be under their policy (or their chosen shipping company).

It’s a little convoluted but it works pretty well. For clients who were going to get an independent appraisal on the stone prior to setting as part of the shopping process anyway, this results in insurance coverage during the setting at a negligible additional cost to you. For those who are on the fence about whether a pre-setting inspection is worth it, this may be the deciding factor.

Neil Beaty
GG(GIA) ICGA (AGS) NAJA
Professional Appraisers in Denver

 

[N8-Star]

dbm...

I had great luck getting a stone insured before it was set into a ring. I went through a CHUBB agent. From what I understand, JM insures loose stones. However, I had good luck with my agent, because my stone was in the hands of my appraiser and about to be sent to the ring manufacturer.... I guess since it was done within such a short time frame, they went ahead and insured it.

I think it would be best to determine the agency you are going to go with and speak with an agent first. They can always direct you in the right direction.

 

[DBM]

Thank you all for the help.

I may have been unclear though in what i meant. I actually wasn't thinking about the insurance covering the stone while loose and during the setting process, I just meant an insurance policy that will cover the entire ring once set only that the appraisal of the entire ring is sort of pre-dated-- it was made while the stone was not yet set in the setting-- so that the customer can submit that to his insurance company while the stone is being worked on in our office, and then upon picking up the finished ring from the office his insurance policy can already be in effect from that time forward. Resulting in a policy based on an appraisal that was made on an entire finished ring when technically speaking, at the time of appraisal, the ring was not finished.

#1 how often do vendors encounter situations such as those as #2 from the side of the insurance company is that legal to bind a policy based on a "pre-dated" appraisal so to speak.

 

[Regular Guy]

DBM...

Unless I''m misreading the details of this activity you''re describing...

Date: 2/21/2007 11:19:23 AM
Author: DBM
I actually wasn''t thinking about the insurance covering the stone while loose and during the setting process...

in what is described above, you''re just getting this as an unintended bonus.

In other words...though your target is one thing, and another person who sets out to do this had a different target...i.e., have the diamond covered while being set...the action is the same. The diamond and setting, not attached, are appraised separately, with the probable notation that they will be together, and that appraisal is sufficient to bind the insurance, at least at JM.

 

[Wink]

Date: 2/21/2007 11:19:23 AM
Author: DBM
Thank you all for the help.

I may have been unclear though in what i meant. I actually wasn''t thinking about the insurance covering the stone while loose and during the setting process, I just meant an insurance policy that will cover the entire ring once set only that the appraisal of the entire ring is sort of pre-dated-- it was made while the stone was not yet set in the setting-- so that the customer can submit that to his insurance company while the stone is being worked on in our office, and then upon picking up the finished ring from the office his insurance policy can already be in effect from that time forward. Resulting in a policy based on an appraisal that was made on an entire finished ring when technically speaking, at the time of appraisal, the ring was not finished.

#1 how often do vendors encounter situations such as those as #2 from the side of the insurance company is that legal to bind a policy based on a ''pre-dated'' appraisal so to speak.

Daniel,

When I issue a "Jewelry Evaluation for Insurance" (that is what we call an appraisal since we are involved in the sale of the item and there are ethical concerns about the vendor doing the "appraisal" which I find somewhat absurd since who knows more about the value of an item I made than I do, but that is a different discussion) it is not a legal issue about whether the insurance can be bound, but rather an issue with the insurance company.

I issue the appraisal for the finished piece, send it along to JM with the appropriate notification that it is the description as it will be after the item is set and only then deliver the stone to my bench for setting. Other than noting the finished weight of the piece there is no need to reissue the appraisal, which Jeweler''s Mutual has been fine with on the few occassions when people were getting the finished item directly from the bench due to time constraints. (I am in Boise, the bench doing the platinum work was located in another state, and the client lived in yet another state. We provided the presentation box with the stone so that the custom ring could be made and delivered directly to the client. High resolution photographs of the finished item were sent to me which I sent to JM and all was good with both JM and my clients.)

I can only think that JM with its bevy of attorneys would not bind such policies if it were not legal.

Wink

 

[denverappraiser]

An appraiser must declare a valuation date for an appraisal to be useful. This makes sense because the value of things change over time. What’s it worth to whom, when and under what conditions are the questions that the appraisal report should be answering.

The situation you are discussing is not one of pre-dating, it’s one of post dating. The appraiser presumably inspected some or all of the components in advance and is writing a report that won’t become valid until some date in the future when the ring is actually assembled and actually delivered. This is dicey for both the appraiser and the insurance company. How, for example, do they know that the diamond and/or mounting weren’t damaged during the assembly process? The classic rule for appraisers is that you should appraise things for what they are, not what they might become. The exception to this comes into what’s known as hypothetical assumptions and these need to be prominently declared within the body of the appraisal. With the exception of the above, most insurance companies will not bind a policy based on such hypothetical assumptions as whether the piece actually exists.

I, of course, understand the objective. You would like to sell things and deliver them with sufficient paperwork to allow the buyers to insure them immediately without the need to visit your competition to get the thing appraised. That’s inconvenient to them and risky to you if they choose an incompetent appraiser. This is not impossible to do but the appraiser needs to write their report with a bit of care and to be especially careful to properly describe who examined what and when. They can, for example, examine some or all of the components in advance and have someone else take the final photos and do the final inspection. This is just fine, as long as it’s properly reported so that the reader properly understands who did what and can make a reasonable decision about whether to rely on the information contained in the report. The appraiser, meaning the person who assigned the value and who is signing the report, is legally responsible for the accuracy of the entire contents and they should choose their assistants accordingly. The person doing the inspection should also sign for their portion of the report.

It’s worth noting that meeting the minimum standards of the insurance companies is usually very easy. I think the companies are being a bit dumb to be so casual about paperwork but it’s the clients who should hold appraisers to higher standards. They’re they ones who are generally protected by a proper appraisal.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Wink]

Date: 2/21/2007 1:09:35 PM
Author: denverappraiser

An appraiser must declare a valuation date for an appraisal to be useful. This makes sense because the value of things change over time. What’s it worth to whom, when and under what conditions are the questions that the appraisal report should be answering.

The situation you are discussing is not one of pre-dating, it’s one of post dating. The appraiser presumably inspected some or all of the components in advance and is writing a report that won’t become valid until some date in the future when the ring is actually assembled and actually delivered. This is dicey for both the appraiser and the insurance company. How, for example, do they know that the diamond and/or mounting weren’t damaged during the assembly process? The classic rule for appraisers is that you should appraise things for what they are, not what they might become. The exception to this comes into what’s known as hypothetical assumptions and these need to be prominently declared within the body of the appraisal. With the exception of the above, most insurance companies will not bind a policy based on such hypothetical assumptions as whether the piece actually exists.

I, of course, understand the objective. You would like to sell things and deliver them with sufficient paperwork to allow the buyers to insure them immediately without the need to visit your competition to get the thing appraised. That’s inconvenient to them and risky to you if they choose an incompetent appraiser. This is not impossible to do but the appraiser needs to write their report with a bit of care and to be especially careful to properly describe who examined what and when. They can, for example, examine some or all of the components in advance and have someone else take the final photos and do the final inspection. This is just fine, as long as it’s properly reported so that the reader properly understands who did what and can make a reasonable decision about whether to rely on the information contained in the report. The appraiser, meaning the person who assigned the value and who is signing the report, is legally responsible for the accuracy of the entire contents and they should choose their assistants accordingly. The person doing the inspection should also sign for their portion of the report.

It’s worth noting that meeting the minimum standards of the insurance companies is usually very easy. I think the companies are being a bit dumb to be so casual about paperwork but it’s the clients who should hold appraisers to higher standards. They’re they ones who are generally protected by a proper appraisal.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

Comment for statement in red. I think that this is the whole point of the exersize Neal, to protect the buyer from the possibility of the ring being damaged during the making of the jewelry. As long as this is disclosed and the ring proplerly examined after manufacture, I think the client, the vendor and the Insurance Company are all being well served.

Comment for statement in blue. I actually have set up with JM to fax them the appraisal and pay them monthly for the coverage so that when my clients leave my office they are already insured. If there were competent independant appraisers here in Boise I would have no problem with my clients going to one of them for an appraisal, but when the appraisers are my competition and are people who have NO IDEA of the value of a Richard Homer cut stone, nor the professional courtesy to call and inquire yet wrtie an idiotic and incompetent appraisal, you bet I don't want to let them go there. Nor do I want them appraising a custom made ring that cost me $3,000 to make as being worth $1,500 to $2,000 as if it were one of the off-the-shelf light weight poorly made pieces of excremental rodent dung that they are selling.

I once had a competitor describe an indented natural on the girdle of a princess cut diamond (pre Infinity days) as a chip and tell my client that they should immediately drive over to my office and DEMAND their money back and let her get them a decent diamond that had not been damaged. Do I want to do it myself you ask? DARN STRAIGHT!

Frankly, I AM the best qualified appraiser in the State of Idaho that I know about, especially for items that we have made because we actually KNOW what they cost to make and the value to replace them. There is one brilliant gemologist here in Boise who does do appraisals, but I do not know what her retail experience is or what she knows about market value. I refer people who want jewelry I did not sell to her all the time, as I do not want to make a living doing appraisals on things I do not know the intiricate details of how and by whom they were made. (Nor do I enjoy doing all the research necessary to do it as well as you do!) As far as I know she is not involved with retail, so I do not know how versed she is in market value, and even if she is, she does not know the value of a Richard Homer stone nor probably for that matter an Infinity or WhiteFlash or other top made stone.

Just my opinions of course. We provide a statement of value for Insurance with all items over $1,000 that we sell and will do so for items with less value if asked. Always have, always will. It is more than a convenience to my clients, it is protection from some of the petty and incompetent "appraisers" who are actually competition with no trace of impartiality. Been burned too many times to trust some of these people, even by people I thought I knew and liked. Too many people will do what ever it takes to make a sale. It is a sad thing to see what someone will do when they have "blood on their teeth" and times are tight.

Wink

 

[denverappraiser]

Wink,

I have no problem at all with you or your staff (if you had one) preparing documents for this purpose and I wouldn’t expect any insurance company to have any problem binding a policy based on one. Because you have intimate details of the sourcing, I would say you are MORE prepared to document your own sales than an independent. I certainly understand the damage that bonehead appraisers can do when they don’t understand the question, don’t understand the answer … or both. In many cases this problem lies at the feet of the consumers who won’t bother to mention details like the cutter of the designer either because they don’t know or because they are looking to ‘test’ the appraiser but it can also be in poor training or poor ethics on the part of the appraiser. If all, or even most jewelers would provide thorough documentation like you do, there would be little need for the kind of services we’re discussing.

My comment to Daniel mostly had to do with the date and the signatures. It’s a common practice for jewelers to prepare a report that remains digitally in the jewelers file until the customer buys the merchandise. They then print up the report and deliver it. They like to have someone on their staff with a few gemological or appraisal credentials to sign the report because it improves the credibility. For most insurance purposes this is entirely acceptable but there are several details that regularly get omitted from this:

1) Who inspected the piece and when? What are their credentials and how can they be contacted?
2) Who made the value conclusion, on what did they base it and WHEN did they make this conclusion? (You can NEVER sensibly assign a value date that’s in the future). As with the above, what are their credentials and how can they be contacted.
3) What is the relationship between the jeweler, the appraiser and the above 2 people, assuming they are different?

I don''t recall ever seeing one of your reports but I would be very surprised if they suffer from any of the above problems.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Wink]

Date: 2/21/2007 4:47:13 PM
Author: denverappraiser

Wink,

I have no problem at all with you or your staff (if you had one) preparing documents for this purpose and I wouldn’t expect any insurance company to have any problem binding a policy based on one. Because you have intimate details of the sourcing, I would say you are MORE prepared to document your own sales than an independent. I certainly understand the damage that bonehead appraisers can do when they don’t understand the question, don’t understand the answer … or both. In many cases this problem lies at the feet of the consumers who won’t bother to mention details like the cutter of the designer either because they don’t know or because they are looking to ‘test’ the appraiser but it can also be in poor training or poor ethics on the part of the appraiser. If all, or even most jewelers would provide thorough documentation like you do, there would be little need for the kind of services we’re discussing.

My comment to Daniel mostly had to do with the date and the signatures. It’s a common practice for jewelers to prepare a report that remains digitally in the jewelers file until the customer buys the merchandise. They then print up the report and deliver it. They like to have someone on their staff with a few gemological or appraisal credentials to sign the report because it improves the credibility. For most insurance purposes this is entirely acceptable but there are several details that regularly get omitted from this:

1) Who inspected the piece and when? What are their credentials and how can they be contacted?
2) Who made the value conclusion, on what did they base it and WHEN did they make this conclusion? (You can NEVER sensibly assign a value date that’s in the future). As with the above, what are their credentials and how can they be contacted.
3) What is the relationship between the jeweler, the appraiser and the above 2 people, assuming they are different?

I don''t recall ever seeing one of your reports but I would be very surprised if they suffer from any of the above problems.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

LOL! Oh my it would be nice to have the time and the staff to have the appraisals done beforehand, on the rare occassions when we do not create the piece at the time of sale that is. Sigh.

Thanks for the vote of confidence. My appraisals contain a limiting conditions page with all of the appropriate comments, especially the one about providing the appraisal (Statement of Value for Insurance) as a service as we were involved in the sale of this item as that is a key fact that MUST be disclosed in my opinion.

On the appraisal page it contains the measurements and weight (actual or estimated and a statement as to which weight it is) of each major gemstone and the average measurents and weight and total weight of the side stones, the color and clarity of each major stone and any specifics stated in a gem report and the number and laboratory of the report and average color and clarity grade of melee gemstones. If the gemstone is a colored gem instead of a diamond it will have a full description of the color of the gem using the color terminology as taught by GIA.

The appraisal will have a photograph of the item printed right on the page, as well as the weight in DWT of the total piece, the price of gold or platinum as appropriate on the date of the appraisal, the metal content of the pieceand whether the content is determined by metal content stamp or actual testing, the hallmark present, if any, and if appropriate the name of the designer involved in designing and making the piece as well as my signature, all of which is printed on my stationary which contains all contact information.

I am sure it does not have all of the information that yours has, but that is a quick summary of what it does contain, which is a heck of a lot better than the appraisals that both you and I have seen that state something like this:

This appraiser has been involved in making and appraising jewelery for _____ years.

One ladies ring with a 1ct diamond $15,000

Signed Joe Stupid Head
Certified Diamondtologist

It makes this old man''s heart happy that you already knew that about me even without having seen my reports, and I list the above only to validate your faith and also to say thank you, sincerely, for your compliment.

Wink

 

[Modified Brilliant]

I won''t assume that an appraiser who is not plugged into Pricescope would properly value a masterpiece by
Richard Homer, an ACA diamond, or any other item mentioned frequently here. Fact is, some appraisers have never
heard of Pricescope. It''s always in the best interest of the appraisal client to make the appraiser aware of any "branded"
or "premium cut" item to assure a proper replacement in the event of a loss.

www.metrojewelryappraisers.com