In summer 1995, the Jewelers Vigilance Committee issued a bulletin cautioning jewelers that we could no longer rely on the long-standing protection of not providing specific identification information when taking in jewelry and watches for repair, modification or appraisal. A jeweler followed industry-recommended procedures and limited the description of a possible emerald to one “green stone.” According to the JVC bulletin, when the worst happened and the jeweler was sued, he had to compensate the client for an emerald.

What other issues should we be careful about during the “take-in” process?

As the JVC scenario has taught us, we’ve been too complacent in relying on “long-standing traditions” as our guide to proper procedures. We should consider more informative dialogue between the jeweler/appraiser and the client as a method of avoiding liability and the accompanying damage to “good will” within our community. It may be that we’ve just taken too much for granted for too long.

Avoidance of definitive statements as to metal content or stone identification is only one of many areas in need of reexamination. This Q&A examines appraisal take-in procedures, but it is also relevant to all take-in scenarios.

Client’s declared value

The issue of client’s declared value is bottom-line relevant to all and is directly appraisal-related. Many jewelers and appraisers use take-in forms or envelopes for items left for repair, cleaning or appraisal. Such forms often call for a client declaration of value for the jeweler/appraiser’s bailment insurance. But a fundamental problem exists with this procedure that could void the very protection it’s intended to provide.

It’s common for a client to be unaware of an item’s “value” and to ask the take-in person for advice. The take-in person might estimate that $3,000 should cover it, and the client signs off under the $3,000 the take-in person just entered on the form.

What’s wrong with this picture? It wasn’t the client’s declaration at all – it was the less-knowledgeable client signing off on the amount the more knowledgeable professional jeweler/appraiser said was correct. If the item were lost or damaged and the client came forward with a claim for a larger amount, whether he or she would be held to that “declaration” is at best questionable.

In most jurisdictions, only a qualified expert is usually allowed to testify to an opinion of value. A common exception to this rule is that owners often are permitted to testify to their own opinion of the worth of their property. And they may substantiated their opinions with an appraisal or the testimony of another jeweler or appraiser who had examined the item previously.

It’s advisable to talk to an attorney who can provide a considered opinion as to the best way to proceed and the language to use with such forms and envelopes. Or because it is primarily state law at issue, it might be more efficient and beneficial to the trade as a whole if your state jewelers association or appraisal organization chapter investigated the issue. Some points to consider if such a form is used to limit jeweler or appraiser bailment liability:

• If the form provides for the client’s signature attesting to the declaration, then that declaration should be the client’s rather than the undeclared view of the jeweler or appraiser.

• If the declaration is made with the advice or input of the jeweler or appraiser, a statement might be attached indicating that such consultation took place, it was made clear that it was an unconsidered opinion and the decision was that of the client.

Meanwhile, the client might request a preliminary appraisal, in which the appraiser’s initial opinion of value might be provided. The client can use such a report also to obtain insurance on the property while it’s in your care – if you don’t carry bailment insurance. And if you don’t have bailment insurance, you must make that clear.

Standard of care

Most states have adopted the Uniform Commercial Code in whole, in part or in some modified form. The UCC provides that in a bailment from which both parties benefit, the appraiser or jeweler is expected to provide the ordinary and reasonable care that any similar professional would provide under the circumstances.

In our scenarios, both parties would benefit: the bailor (the client) from the service provided and the bailee (the professional) from the payment received.

Covering the bottom line

With all the attention given to protecting ourselves from liability, we sometimes forget the reason the jewelry is being left in the first place. The most important part of the take-in process is establishing a clear understanding of the intended use and purpose of the appraisal assignment. Many complaints would be avoided if the initial client interview were conducted properly and by qualified personnel. It’s rarely sufficient to have a salesperson place a check mark in a list of types of appraisals.

The three most important things to establish:

• The client’s intended use (“function”) for the appraisal, which also defines the appraiser’s purpose. Considerations unique to the four most basic consumer appraisal-related needs have been the subject of previous Q&A columns in JCK (consumer insurance [replacement], September 1994, p. 70; avoiding conflict of interest by providing an estimate of replacement cost, p. 53, November 1994; confirmation of fair purchase price, p. 40, December 1994; and a two-part column on consumer resale appraising, p. 130, March 1997, and p. 192, June 1997).

• Whether the appraisal is to be a valuation based on the readily apparent identity of metals and gemstones or an evaluation, including laboratory testing of materials and component parts or both.

• That proper understanding between the client and appraiser on the intended use of the report also will tell the type and format of report that would be appropriate (that is, a Summary Appraisal Report or Insurance Replacement Estimate for insurance, a Self-Contained Report for tax and other legal scenarios or a Restricted Report for consumer resale or other situations where the information is intended only for the client’s use.

If an assignment appears to be particularly complex, your in-house or independent appraiser should speak to the client further before any final agreements are made dictating how to proceed.

Satisfying the client & avoiding liability

We often make risky and erroneous assumptions regarding what clients understand about jewelry cleaning, testing and repair procedures. As a result, we often expose their property to risks and damage without ever advising them of what the costs, risks and benefits might be and without obtaining their informed consent.

In a similar vein are assumptions related to client knowledge of appraisal procedures, such as exposure of them and their property during field research, as well as limitations and uses of different appraisal assignment types and reporting formats. Seek clients’ consent on procedures they may not know or understand. Remember that what is routine to you isn’t necessarily routine to a client.

Avoiding problems

A few areas of caution to consider to avoid unwarranted headaches and potential liability:

• “Don’t play with other people’s toys without permission” is a good childhood rule to keep in mind. Common examples are the use of a scratch stone for metal testing, opening the backs of watches and cleaning items. If a procedure is really necessary, explain it and get permission from the client.

• All initial take-in procedures should be done in front of the client – always. Even cleaning a piece of jewelry should be done within view of the client.

• Check for loose, chipped or otherwise damaged gemstones, weakened prongs or any other structural hazards. Point out any problem you find to the client and receive his or her consent to proceed.

• Check for any gemstone treatments of an unstable or reversible nature. Inform the client of anything you find.

• Do an inclusion plot of any important center stones or take a photomicrograph of the inclusion pattern and have the client sign it. A photo or even a photocopy are ideal for marking any areas of items that have existing damage.

• Ask the client for any inform-ation he or she might have from the original seller that might help to cut down on the limitations presented when dealing with mounted, finished goods, such as stone weights or gem treatments.

• Ask the client for any information available on the recent sales history of the property. The subject property itself shouldn’t be overlooked as the best of comparables.

• Client advice and consent must be obtained if the item is to be stored, moved or carried to any location(s) other than those of which the client has been informed.

• Explain that research might include consultations with others regarding their property. We would not want to inadvertently violate any confidentiality concerns that the client has.

Most of the above suggestions can be reduced to a checklist you can review with clients during take-in. Have them sign a statement indicating they have been informed of the meanings of all elements of the checklist, that they understand and that they give their consent to proceed in accordance with the agreement.

Elly Rosen is a freelance appraisal principles consultant in Brooklyn, N.Y. His new Appraisal Information Services (AIS) OnLine Network offers subscriptions to appraisers for appraisal consulting, The Appraisal Reporter (an appraisal principles newsletter) and gemological appraisal supplement, and a Glossary of Appraisal Terminology. Rosen also offers appraisal report “boiler-plates” and formats for various types of appraisals, an audiotape lecture series on appraisal issues and a glossary of professional appraisal terminology.

Rosen was one of the principle developers and instructors of the Certified Appraiser of Personal Property program (CAPP) from 1982 to 1993. He also is a member of the Jewelers Vigilance Committee’s Appraisals Task Force and was one of the principal developers of the new JVC Guidelines for Insurance Replacement Estimates. Rosen has offered to take questions from JCK readers at (718) 692-1975 or via e-mail to ais@polygon.net.