Since I can't seem to make embedded links work I went to the full version of the first 2 pics and posted them, along with the link to them in case you need to magnify them. The third one shouldn't need the link to it to read.
a 501(c)3 Non-Profit Education Organization 24 October 2018
Editorial: How the GIA Avoids Responsibility for Errors!
Case history of how the GIA and diamond grading labs avoid responsibility for errors!
Editor's Note: As promised, I have included documents from actual litigation involving errors in a GIA Diamond Grading Report to demonstrate how the GIA deflects and avoids taking responsibility for errors and omissions. Over my 47 years in this industry, I have experienced this kind of thing from many of the major diamond grading labs. This is one story direct from my work as an expert witness on this case. Rj
The following is a true story:
In 2007 the GIA issued Diamond Grading Report #16175691, dated May 30, 2007, on a 4.80 carat E/VVS2 emerald cut diamond. The certificate did not mention any treatments being involved with this diamond. You can click on the image at left to see the full GIA Diamond Grading Report #16175691.
https://instituteofappraisal.com/Newsle ... /GIA1a.jpg
Earlier today, I went to the GIA Report Check website, and entered the same GIA Diamond Grading Report #16175691 and got the report you see below.
Same GIA Diamond Grading Report #16175691.
Same Date: May 30, 2007.
The problem, the GIA Diamond Grading Report has been altered by the GIA to now reflect that this diamond has been treated to change its color. The new certificate reports this diamond as HPHT treated. Same GIA Diamond Grading Report, same date, same everything. One GIA Diamond Grading Report number, but two very different outcomes.
The GIA admits....these were both issued by the GIA. You can click on the image below to see the full page, or go to the GIA Report Check and enter: 16175691 and confirm this for yourself. Below is the rest of this story.
https://instituteofappraisal.com/Newsle ... /GIA2a.jpg
The diamond in question was originally graded in 2007 and issued the grading report seen at top. In 2013 the diamond was sold and sent to the GIA for a report update. While the original report did not show any HPHT treatment in 2007, in 2013 the GIA reported the diamond as HPHT treated, and called for the original report to be returned, and then issued the updated certificate you see immediately above.
The problem, of course, the diamond was already sold based on the original 2007 GIA Diamond Grading Report as natural color.
When the buyer got the report of HPHT treatment report in 2013, they filed litigation against the seller for fraud.
The seller sold the diamond in good faith, based on the original GIA Grading Report.
The buyer and seller incurred over $100,000.00 in legal costs based on the GIA error.
Actions taken by the GIA Regarding This Costly Error
The GIA issued a letter acknowledging that the error was the fault of the GIA. You can see this letter in its full size by clicking the image at left. However, as the litigation moved to binding arbitration, this letter was the only response from the GIA. During the course of the litigation, the GIA:
* refused to take financial responsibility for the error,
* refused to appear in litigation proceedings to answer for the error,
* refused to provide any grader's notes, forms or documentation from the original grading, and
* walked away from the entire litigation process without incurring any costs in time or money, beyond the above referenced letter and report replacement.
The resolution to this case is at the end of this editorial. It may surprise you. But first...
This situation raises two serious questions about the difference in legal responsibility taken by the major gem labs compared to local jewelry appraisers:
Question #1: How could the GIA make such a heinous error and not be held legally and financially responsible for the losses incurred because of its admitted error?
Question #2: If a local jewelry appraiser made this same error on an insurance replacement appraisal, wouldn't the appraiser be held legally responsible for the losses and legal costs?
The answers may amaze you.
The GIA Absolution from Errors
On the back of a GIA Diamond Grading Report I found this statement below, behind which the GIA deflected any responsibility for the losses or legal costs for their admitted error. Read the following carefully, direct from the GIA Diamond Grading Report fine print:
“GIA and its employees and agents shall not be liable for any loss, damage or expense resulting from any error in or omission from this report or from the issuance of or use of this report or any inscription, even if the loss, damage or expense was caused by or resulted from the negligence or other fault of GIA or any of its employees…”
In other words,
If we make an error that causes damage….we are not responsible.
If we omit a fact that causes damage….we are not responsible.
If our employees are found to be negligent in doing their work…..we are not responsible.
This type of disclaimer is not limited to the GIA but is also found in some form with almost every major lab world-wide. This is the state of our diamond grading lab industry. On this basis are virtually all diamonds and colored gemstones of the world markets sold to consumers.
Therefore, the answer to Question #1 is that the GIA puts this very fine print on the back of their grading reports, and if you use a GIA Diamond Grading Report you agree to hold them harmless in the event they make the above costly error, even if their employee did it on purpose. Seriously, this is what this says.
Jewelry Appraiser's Errors and Omissions
The answer to Question #2 is quite simple: If a jewelry appraiser makes a material omission or error in a jewelry appraisal document that causes a client to suffer a loss, the appraiser can be held legally liable for the loss and ensuing costs of litigation. A simple overview of this is available from Jewelers Mutual Insurance Company's document: Jewelry Appraisal Liability Insurance.
https://cms8.jewelersmutual.com/Jeweler ... 016-FA.pdf
This, of course, brings us to a third and most important question:
Question #3: How can the GIA (and other major labs) with their multi-million-dollar businesses issuing diamond grading reports not be held to the same legal standard as the local jewelry appraiser?
A Very Disconcerting Situation in the Diamond Industry
The sad truth to this situation is that the GIA and other major labs operate without legal standards or oversight because there is no government or legal statute to govern the multi-million-dollar diamond grading report lab business. The GIA and all other labs operate in a legal void. While local, home-town jewelry appraisers are held to all sorts of legal standards by the IRS and others, the major labs operate in a void outside of any type of oversight or standards. As a result, the GIA can make the kind of errors you see above that cause hundreds of thousands of dollars in litigation costs, and simply say: Too bad, and not our problem.
At the same time, if a local, home-town jewelry appraiser made this kind of error, they would potentially be held liable for the loss and all litigation costs. The local, home-town jewelry appraiser could be wiped out by a case like this, while the GIA walks away unscathed by it all.
This is a very serious fact about the current diamond market. The major labs are not held to the same standard as your local jewelry appraiser.
The Conclusion and Solution
The other fact that neither the GIA, IGI, EGL or any other lab wants consumers to know is this: Lab reports are considered "hearsay" evidence in court. I know because I have been in litigation (Direct Shopping Network -v- Robert James et. al.) where the AGTA GTC Gemstone Reports were disallowed as evidence since the person who signed the reports could not be produced in court by Direct Shopping Network. That is the "Achilles heel" of the major diamond grading reports, or any lab report of any kind. The major labs cannot (read: will not) produce the actual person who did the grading or identification in a court of law to testify and be cross-examined by the other side of the litigation. This leaves one major conclusion that consumers need to know:
Major lab diamond grading reports = sales tools, nothing more.
Only diamonds graded by professional jewelers, proper trained gemologists and professionally trained appraisers (preferably members of the National Association of Jewelry Appraisers) carry legal weight in courts since these people are legally responsible in a court of law for the information contained in their documentation and/or reports. The major gem labs go to great lengths to disavow any legal responsibility for their reports, and case history (as seen above) demonstrates the willingness of the GIA specifically to invoke this refusal of responsibility.
When it comes to standing behind their work, the GIA and other major gem labs refuse to do so.
Case Resolution
For those interested, here is what happened at the end of the above referenced case:
The case was settled by "Binding Arbitration". Rather than go to court the case was heard by a private arbitration firm, hosted by a retired judge, and all parties agreed to make their case and allow this arbitrator to decide the case. All parties were bound to abide by the decision, hence the name: Binding Arbitration.
The basic overview was that the judge decided that the GIA was the cause of the case, but since the GIA refused to appear in the civil action (where subpoenas do not have the force of law) and refused to take responsibility for their error, that the sale of the diamond would simply be "walked back", meaning the seller took the diamond back and the buyer got his money back.
Beyond that, and here is where it got heinous, both parties had to pay their own legal fees that resulted from the GIA error.
On the day the case was settled, I was at the home of the party who had engaged me as expert witness, and she asked me to publish the story of this case. "You need to tell the world about how the GIA will not be responsible for their errors" was how I remember her asking me. I published the story shortly after the settlement of the case. The story included the GIA Diamond Grading Reports, and an overview of the case. (The GIA Letter above is first being seen here today).
Two days after I published the story, the client's husband called me back, desperate to get me to retract and withdraw the story that they, just the week before, asked me to publish to the world. Why?
Her husband called me to report that the GIA was now offering money regarding the situation, after I published the story. The condition of payment was that I retract and withdraw the newsletter, including the documents you now see above.
Knowing her situation, I agreed and withdrew the newsletter. I NEVER retract when I know the truth has been told, but I did take down the newsletter so that the GIA would pay whatever money was being discussed for me to withdraw the story.
I have no knowledge of how much, if any, funds were paid to the client by the GIA. I do know the situation ended abruptly.
Today...the full story is told.
Robert James FGA, GG
President, Insurance Institute of Jewelry Appraisal Inc.
President, Jewelry Adjuster, Independent Insurance Adjusting Firm
Texas Department of Insurance Property and Casualty Adjuster #1300433
If you have problems viewing the images, please read this editorial on our website: How the GIA Avoids Responsibility https://instituteofappraisal.com/how-th ... or-errors/
About the Insurance Institute of Jewelry Appraisal Inc.
The Insurance Institute of Jewelry Appraisal Inc. is a 501(c)3 Non-Profit Education Organization dedicated to your success in the gemology and jewelry appraisal profession. We are supported in the insurance industry by the Jewelry Adjuster, a member of the National Association of Independent Insurance Adjusters. Our program is recognized by the National Association of Jewelry Appraisers, the Diamond Council of America and others.
To visit the IIJA Website, click here. https://instituteofappraisal.com
©2018 Insurance Institute of Appraisal Inc. ALL RIGHTS RESERVED. We encourage sharing and caring throughout the industry as long as all copyrights are left intact.
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Insurance Institute of Jewelry Appraisal Inc.
PO Box 1727
Helotes, TX 78023
