May 2003

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


What's a Certified Appraiser? - January

Best Appraiser Credentials - February

Are the diamonds you’re insuring real? - March

Handwritten Appraisals - April


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

Not just a pretty face - August

Moral hazards on the rise - September

Hurricanes, fires, floods—and jewelry insurance - October

Inherent vice / wear-and-tear losses are rising - November

FRAUD UPDATE – lack of disclosure, false inscriptions & doctored docs - December


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

Growing Bigger & Bigger Diamonds - October

Scam season is always NOW - November

Ocean Diamonds - December


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


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


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


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


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


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


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


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


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


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


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

Grading the Color of Colored Diamonds

New GIA Cut Grade for Diamonds - December


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


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


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


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


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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Counterfeit Diamond Certificates

A new international scam imitates GIA Diamond Reports to increase the value of low-quality diamonds.

In a scam that became public this spring, certificate counterfeiters imitate the best: diamond grading reports by the Gemological Institute of America (GIA). As discussed in our March 2002 issue, GIA is the most respected authority for diamond grading. GIA standards are universally accepted, and its diamond report is usually accepted without question.

The counterfeit operation involves clarity-enhanced diamonds.

Why clarity-enhanced diamonds?

Diamonds that have internal fractures or surface-breaking cavities cannot command high prices. Clarity enhancement, or fracture-filling, is a process in which such fractures are filled with a foreign substance to make them less noticeable.

before and after fracture filling The treatment dramatically improves the diamond’s appearance, making it more appealing to the purchaser. These pictures show the same gem, before and after fracture-filling. Though the fractures are invisible to the naked eye, they are still quite evident to a trained gemologist using a microscope.

Fracture filling is not a permanent treatment. As the treatment breaks down, the poor quality of the stone becomes apparent. The gem may come to look like a badly damaged diamond, and the customer might file a claim for breakage. Also, the filling material is weaker than diamond, making the stone more susceptible to breakage. Thus a clarity-enhanced diamond is worth far less than an untreated diamond of similar appearance.

Fracture filling is surrounded by controversy in the jewelry industry because the treatment, and its long-term effects on the stone, often are not disclosed to the customer. The purchase price and the insurance valuation would then be far more than the jewelry is worth.

In one case, a pair of diamond earrings was appraised at $48,000. When one earring was lost, the insurer paid out the full limit of liability (represented as irreplaceable). Examination of the remaining earring, being sold as salvage, revealed that the stone had been clarity-enhanced. It seemed likely that the stone in the lost earring had been similarly treated, and additional documentation showed this to be true. The purchase price and valuation for the earrings had been appropriate for untreated stones of the stated qualities; the insurer had overpaid the claim by $31,000.

Is the jeweler responsible?

The jeweler may be deliberately deceptive in not disclosing clarity enhancement, or the fraud may originate before the retail sale. Suppliers may sell inferior, clarity-enhanced stones to the jeweler without disclosing the treatment, and charge the jeweler for higher quality stones. The jeweler may then just pass on the low quality and high price to the consumer.

Ideally, a selling jeweler examines and verifies the quality of all the jewelry he sells. However, many jewelry retailers have neither the training nor the gemological lab to perform a proper inspection. In a recent survey, 78% of insurance appraisals were written by jewelers with no gemological training. Such jewelers often rely on whatever documentation comes with the jewelry. The operators of this scam could count on many jewelers accepting the counterfeit GIA certificates without independently inspecting stones.

This scam is a double fraud. 1. It takes advantage of GIA’s reputation. The presence of a GIA diamond report puts everyone (retailer, purchaser, insurer) at ease, less motivated to look for an independent appraisal. 2. It passes off low-quality, clarity-enhanced stones as valuable untreated diamonds.

This counterfeiting operation is international in scope. GIA has filed lawsuits in Chicago, Israel and Italy in an effort to halt the operation. Israel is where one of the major clarity-enhancement processes was invented. Florence, Italy, is a major manufacturer of high-end jewelry sold throughout the world. An unknown number of counterfeit certificates are already in circulation. This scam may run to billions of dollars—for consumers and, potentially, for insurers.


GIA, as a matter of policy, does not certify clarity-enhanced diamonds. If you see a GIA Diamond Report with the words "clarity enhanced" or "fracture-filled," it is surely counterfeit.

A GIA Diamond Report is not a substitute for an appraisal, since it describes only the gem, not the setting, and it does not give valuation. For high-quality jewelry, it is a good idea to ask for two appraisals, preferably prepared on the ACORD 78/79 Jewelry Appraisal form. One of them should be from a jeweler other than the seller of this jewelry. The appraisals should completely describe the gems and the setting, and give a valuation. They should list any treatments (such as clarity enhancement) or they should state that the diamond is untreated. Treatments are crucial to the valuation of diamonds and their presence or absence should be explicitly stated.

The counterfeit GIA certificates were used HEAVILY to support Internet sales. If you know the diamond was purchased over the Internet, be especially wary.

GIA reports have various security features, including a hologram, microprint lines, chemically sensitive paper, and other proprietary features, to thwart counterfeiting and tampering with their documents. However, these features are not known, or are not apparent, to the average insurance professional or consumer.

If you have any concern about the authenticity of a GIA Report, contact the GIA Gem Trade Laboratory by phone (760/603-4500) or fax (760/603-1814).

AGS (American Gem Society) is the other highly respected organization for impartially grading diamonds. Occasionally their diamond certificates are also forged. If you suspect a forged AGS certificate, verify the report number with AGS (702-255-6500).

Other labs offering diamond reports may be unreliable or non-existent. As there is no way for you to verify the reliability of other diamond certificates, we recommend that you accept diamond reports only from GIA or AGS.


See "FOR AGENTS & UNDERWRITING" comments above.

To reiterate, fracture-filled diamonds have a significantly lower value than non-treated gems. An appraisal for any high-priced diamond jewelry should specifically state that the gem is untreated or should list any treatments. If this information is lacking, and the jewelry is of considerable value, consider consulting an expert to help determine that the valuation is consistent with the appraisal description.

Have all damaged stones examined in an independent gem lab by a Certified Insurance Appraiser (CIA)™. It often happens that a treatment temporarily conceals the low quality of a stone, but that time or circumstances cause the treatment to break down.

It is wise to suspect the breakdown of a fracture-filling treatment if:

A competent jeweler will be able to see whether or not a foreign substance was injected into the gem. The destruction of a fracture-filling treatment is not considered damage to the stone, and the insurer is not liable.


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