Occasionally a contents consultant may work on a loss involvingvery expensive gems. Because of privacy concerns, we will notdiscuss the specifics of this next case but will instead focus onthe process of evaluating gems and how to accurately assess damageand re-evaluate value.

What we can share is that the diamond involved in thecase was insured for several million dollars. Thislarge diamond, or “rock” as some would say, registered between 10and 20 carats—with both incredible clarity and color.

Certificate Stones

Today, stones of this type are almost universally “certificate”stones. A “certificate stone” means that an independent gradingagency has inspected the stone in a laboratory, and has graded thestone, issuing a certificate documenting the grading. Just as thetelevision ads for Carfax point out, it is often much better tohave independent corroboration of a car's history instead oftrusting the story being told by the salesmen trying to sell thecar.

In addition to establishing the stone's weight (in carats), theagency grades the stone against established standards for color,clarity, and cut. The stone is inscribed with an identifyingnumber, and a certificate is then issued displaying the stone's IDnumber.

There are several labs that perform diamond grading. Thenonprofit Gemological Institute of America (GIA) is one of the mostrespected and most widely recognized among grading labs in theUnited States. Beware, however: Not all certificates are bornequal. Just as different teachers grade differently, with somegrading easier than others, the same is true of gem gradinglabs. It is always important to only compare stones graded bythe same lab and understand that two stones with identical gradesfrom two different labs may vary in quality and price.

A Rare Gem

Large diamonds are rare. Furthermore, large diamonds ofexceedingly great color and clarity are extremely rare. Finding anexact replacement of such a large stone of quality is virtuallyimpossible. Often the best source for such astone is recutting the damaged stone. We know the stone will retainits wonderful color and clarity while simply losing some of itssize. A diamond cutter needs to be consulted to determine how tobest recut the stone and what the loss in weight will be. The stoneshould be re-graded and re-certified after it is recut. The onlyissue then becomes how much value diminution results from the lossof size.

If the stone loses half it weight, then would it be valued athalf of the original stone? Absolutely not. Apportioning the valuebased on percentage of size is not appropriate. We have establishedthat large diamonds of exceedingly high quality are extremely rare;high quality stones of half the size will be much more plentiful. Alarger stone will have a much higher value per carat. A stonereduced to half of its size may only be worth a small fraction ofthe original stone.

In this case, the size and location of the damage was as“fortunate,” as such damage can be—resulting in a recut gem with asomewhat minimal loss of weight (of less than a carat). A singlestone of the same color and quality weighing one carat would cost$22,000. Would the loss be equal to the value of this one caratstone? A carat is a carat, isn't it?

Well, because this carat happens to be part of a large, rarestone, the per-carat value balloons nearly tenfoldto approximately $200,000 per carat. I cannot tell you the actualdollar amount of this loss, but I can tell you that losing lessthan a carat in the re-cut results in a loss in value of more thanthe average value of a home in Atlanta, Georgia.

Tom Kirkpatrick is a consulting founder at Enservio, which offers software andservices across the entire value chain of contents claimprocessing—from onsite inventory capture and forensicreconstruction of non-restorable contents—to transcription, deskappraisal, contents valuation software and services, payment,replacement and predictive analytics. He may be reached at [email protected].