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The art of self-defence: Disclosures, disclaimers, and delusions

Is anyone being fooled?

The colour of this three-carat diamond exceeded the 'N' master stone and yet was clearly not in the 'fancy' range. It was important to disclose the fact the grade was 'estimated,' as well as the market data, suggesting the impact on value should the estimate prove incorrect.
The colour of this three-carat diamond exceeded the ‘N’ master stone and yet was clearly not in the ‘fancy’ range. It was important to disclose the fact the grade was ‘estimated,’ as well as the market data, suggesting the impact on value should the estimate prove incorrect.

Disclaimers and delusions are, in my opinion, simply varying degrees of the same idea; namely, that we can somehow avoid taking responsibility for our actions or inactions. Probably the most deluded of the disclaimers I commonly see in an appraisal document is a statement along the lines of, “The appraiser accepts no responsibility for any action taken on the basis of this appraisal.” I’ll confess I generally laugh out loud when I read it. Let’s think about the implications of such a proclamation for a moment.

First, a person (or firm) that holds herself or himself out to the public as an expert has performed a professional service for which they were paid. Second, the client had specific expectations regarding the ability of that person to competently perform that service. Third, the client undoubtedly expressed to the appraiser how they intended to use the report (or the appraiser should have asked). Finally, the client, for all of those reasons, had every reason to believe the reported facts and value opinion to be credible. However, in spite of all of that, the appraiser appears to believe they can be absolved of any and all responsibility by a 15-word sentence. Wow! Wouldn’t life be interesting if everyone held the same belief!

Imagine your accountant telling you she isn’t responsible for anything that happens after she’s prepared your taxes, or stepping into a taxi and having the driver say he may or may not take you where you’ve asked to go, and if he gets lost or is in a wreck, it’s not his responsibility. Clearly, real life doesn’t work that way and neither does appraising.

Disclosing the level  of authentication  undertaken and the potential economic impact of damage  are examples of requirements imposed by USPAP that apply to the jewellery appraiser.
Disclosing the level of authentication undertaken and the potential economic impact of damage are examples of requirements imposed by USPAP that apply to the jewellery appraiser.

It’s important to make the distinction between disclosing limiting conditions and dodging responsibility for one’s actions. For instance, I have a limiting conditions disclosure in my reports stating that mountings restrict inspection and therefore, may negatively impact the accuracy of measurements and grades. I state measurements and grades are assumed to be accurate, but that if the same stones were to later be examined out of the setting, it is possible adjustments would be made. That’s not the same thing as providing a range of weights or grades that is so broad as to make the value conclusion meaningless. I’ve seen reports in which the centre stone was described as “approximately one carat, near colourless, and with no eye-visible inclusions: $XXXXX.” So, is the diamond .89 carats/J/SI-2 or is it 1.10 carats/F/IF? Users of the report have no reason to have any faith in the value without an understanding of its basis.

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Whenever an appraiser describes any single stone’s value elements as ranges, it is very likely they are doing so to protect themselves (i.e. a disclaimer of responsibility), rather than serve the client. Obviously, mountings are a limiting condition and it may be difficult to feel comfortable assigning a single grade to a diamond. If the intended use of the report requires a single grade to defend the value (i.e. for insurance replacement value), one should get over the discomfort and do his or her job! We’re assumed to be professionals, and if we’ve explained the circumstances under which the examination occurred and its potential impact on the grade and value opinions—which are disclosures required in USPAP Standard 8—then everyone understands we might change our minds when we see the stone loose or under different conditions. It suddenly becomes much more comfortable to state a single grade as one sees it. Doing so gives the report’s users confidence in the value and sufficient information to recognize its limitations. Of course, sometimes industry standards dictate some flexibility; for instance, below the colour grade of ‘N,’ GIA diamond grading reports state a two-grade range, so it would be understandable to follow suit. For the record, O-P, Q-R, S-T, U-V, W-X, and Y-Z are only possible grades on GIA reports for non-fancy coloured diamonds below ‘N.’

Trust is earned

Beyond compliance with external standards and requirements, I feel like the more ‘open’ our appraisal process becomes, the greater the trust our clients will have in our ‘opinions.’ It can be difficult admitting the limits of one’s knowledge or abilities, and when faced with those kinds of situations I remember the words of a mentor: “We aren’t expected to be perfect, just competent.” For me, that means trying to recognize and eliminate anything in my behaviour or my appraisal report that is self-serving and intended to deny or deflect accountability for my actions or inactions. Our clients have very high expectations of us and will often make important financial decisions on the basis of our work. We need to accept that responsibility and gain the competency to feel comfortable doing so.

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Mark CartwrightMark T. Cartwright is an accredited senior appraiser, master gemmologist appraiser (American Society of Appraisers), independent certified gemmologist appraiser (American Gem Society), and GIA graduate gemmologist, who has provided gemmological and jewellery appraisal services since 1983. He can be contacted via e-mail at gemlab@cox-internet.com.

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