Thinking Broadly Inside the Box

Posted on May 1, 2021 by Bill Hoefer, GIA GG, FGA

Sometimes appraisers forget to work within boundaries to achieve success. Since we are related to the jewelry trade, gemologist-appraisers might want to think broadly inside the box. Thinking broadly inside the box is what Henry Brown, a Virginia slave, did by successfully mailing himself in a 3 x 2.67 x 2-foot box to freedom in 1849! 1 FIRST THINK BROADLY Many appraisers feel that they must make only one decision with the identification, quality, or value conclusions. The decision will not only affect the appraisal client but also third parties who are authorized to rely on the appraisal. If the appraiser is not sure that the gemstone, is enhanced, or from a particular country, or has a certain color grade, or weighs more or less than a carat, and a myriad of other “what if” possibilities ... which possibility does the gemologist-appraiser report? Figure 1. Additionally, appraisals may have difference-of-value conclusions based on various value elements choices. Does one ignore, for example, opposing expert opinion and only report their own? Invented by the insurance arena but so useful for all appraisal assignments is a valuation methodology tailored for handling two or more valuation decisions. It is time to climb inside the box. FIGURE 1. “What if...” What does the gemologist-appraiser do if they disagree with stated weights or even the grades on accompanying laboratory reports? BROAD EVIDENCE THEORY 2 In some jurisdictions, when a casualty loss occurs and it ends up in an appraisal dispute panel, any evidence that would shed light on value can be presented in determining actual cash value. Thus, the Broad Evidence Rule is used. Rather than merely following the formula of determining retail replacement minus depreciation and obsolescence, the courts want all value evidence.3 One court stated, “. . . The Broad Evidence Rule permits the consideration of all evidence logically related to the formation of an accurate estimate of the value of the destroyed or damaged property, for the purpose of ascertaining the 'actual cash value' at the time of the loss. In applying this rule, it is not necessary to abandon consideration of either market or reproduction values, but they must be viewed merely as guides and not the sole determinative in arriving at 'actual cash value.'”4 The goal of insurance is to achieve indemnity. The Broad Evidence Rule allows the court the ability to select a value that best achieves that goal outside the bounds of a contractual formula. The goal of indemnity is the same goal that a gemologist-appraiser rendering valuations for insurance must achieve in their value conclusion. WHAT VALUE EVIDENCE IS REVIEWED BY THE COURTS? The acquisition cost, fair market value, cost of replacement, cost of reproduction, cost of reconstruction, value to owner, and value in use are all acceptable to consider by courts or hearings seeking Broad Evidence in states that embrace the Broad Evidence Rule for insurance settlements. But Broad Evidence is a methodology that also can be used in non-in- surance settlement assignments. Appraisers wishing to excel in personal property appraisal theory must apply the Broad Evidence Rule whenever...

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