SECTION 6.

DETERMINATION OF ADJUSTMENT VALUES.

A. Liability for Adjustment

Assuming liability for the payment of a claim has already been established, this section of the Guide offers a procedure for appraising the worth of a textile article on which an adjustment is to be made. The information in this section has become widely accepted as a voluntary means of establishing the monetary value of an article for claims adjustment purposes.

B. Factors Determining Adjustment Value

Many factors are taken into account when deciding the value of a used textile article in adjusting a claim. How long is it expected to perform satisfactorily, how much has it been used, and the depreciative effect of style changes all have a bearing on its monetary value. (See Section 2, Life Expectancy.) A well-worn often used garment is less value than an identical garment of the same age that is in good condition. Aside from the amount of use it has had, however, a garment loses value merely with the passage of time because of changes in style and appearance. A garment or other textile product loses its value even if its owner has not obtained the fullest use of it.

Differences in monetary value also result from differences in basic characteristics of the article. For example, a lined drapery will give longer service than an unlined one; sheer curtains or draperies generally do not last as long as heavier drapery fabrics. All of these factors have been taken into account in the establishment of Life Expectancy Rates in Table I.

C. Residual Value vs Antique Value

Beyond its term of Life Expectancy, an article retains a “residual value” for as long as it remains in useful condition. This is usually a minimum monetary value, except in the case of heirlooms or articles that have a recognised antique or historical value based on the current market demand for such products. Because people form sentimental attachments which tend to inflate the value of articles they own, “sentimental value” has been ruled out as a valid consideration. Also labour content of homemade garments has been ruled out for similar reasons.

D. Replacement Cost of Article on Adjustment Value

Adjustment value is based on the cost of acquiring a new article of comparable quality and is referred to as Replacement Cost. The original cost is not taken into account except as may be necessary as a guide for establishing quality. The same applies to gift articles for which no payment was originally made. This is in accord with well-established practices in the insurance adjustment field.

E. Effect of Condition of Articles on Adjustment Value

Three levels of adjustment are defined in relation to the amount of use and care the article has had. An article is accorded a maximum value when in “excellent” condition, and a minimum value when rated as “poor” within the meaning of the following definitions of these terms:

Excellent Condition - Having the appearance of an exceptionally well cared for article which belies its age.

Average Condition - Having an appearance expected of an article which has had reasonable use, considering its age.

Poor Condition - Having the appearance of extensive use but not of abuse. Evidence of repairs, the presence of well-worn areas and permanent discolouration, provided they do not destroy usefulness of the article, are considered to be signs of poor condition.

It is assumed that in the first year of service it is not likely that the effects of use would have become sufficiently noticeable to permit an evaluation.

F. Age of Textile Products

The age of an article shall be calculated from the time of its purchase as a new article. This age may be determined by receipts of purchase, by store records, by informed opinion, or negotiation. It is presumed that an age factor can be established to the satisfaction of the parties involved in the claim.

G. Condition of Lost Articles

In the case of lost article that are not available for examination, it is assumed that they are in “average” condition and that the factors of replacement cost and actual age can be negotiated satisfactorily.

H. Basis for Claims on Articles Having Complementary Value

Liability for adjustments shall be to all those items involved. For example damage to a pair of trousers of a three piece suit may involve liability of all three pieces. Liability may extend to all items even if they were not involved in the transaction.

NOTE: When adjustments of 100% of depreciated cost are made, payer of the adjustment becomes owner of the entire garment.

Items sold as coordinated “separates”, such as jumper, skirt and blouse ensembles, are treated as individual, unrelated articles because they can be used independently.

An article that has not been damaged, but which contains an accessory that has been lost or damaged, shall be subject to an adjustment by replacement of the part with a reasonably satisfactory substitute. Buttons, matching and contrasting belts or other detachable accessories are included in this category. Conversely damaged embroidery or other firmly placed ornamentation, partial belts permanently attached to a dress, and other integral features of a garment which cannot be repaired or replaced to reasonable satisfaction, shall be considered the same as damage to the entire garment.

I. Wedding Gowns

A wedding gown is bought for a specific occasion and, unless altered to another use, cannot be worn again except for another wedding. It is within keeping with the philosophy of this Guide to regard such a garment as having substantially fulfilled its intended purpose after the wedding. Its value is thereby reduced to not more than 50% of its replacement cost. A new garment prior to the wedding is rated at full value. When altered as a dressy garment, the life expectancy rating for the new classification is applicable.

J. Repairs in Lieu of Adjustment

Some types of damage to textiles can be repaired satisfactorily, such as re-weaving holes or tears. It is understood that liability can be discharged in certain cases by expert repair of the damaged areas provided the repair does not change the monetary value of the article below what it was before the damage took place.

K. Use of Tables for Calculating Adjustment Values

Table I gives life expectancy rate for various textile articles. Table II, based on the actual age of the article, is for use in calculating adjustment values. Use of the table assumes that the age of the article has been agreed to in terms of months for items having a life expectancy up through 5 years, and in number of years for items with a 10 year life expectancy. The corresponding adjustment values shown in this table are given in percent of the replacement cost.

L. Effects of Adjustment by Return of Damaged Article.

When a cash adjustment is paid on a damaged article, or an article has been returned to a store for credit, the payer of the adjustment or credit has acquired ownership and may properly take possession. The article may have value as merchandise, or it may serve an educational purpose. If it is wanted by the person receiving the adjustment, such return may be considered in lieu of part or full cash payment or credit.

M. Waiver of Service Charges

When loss or damage occurs in servicing due to negligence in processing, and responsibility for damage is acknowledged by the person rendering the service. When the loss or damage is the result of a condition of use or inability of the article to withstand a properly rendered service in accordance with Section 5, waiver of charges shall be at the discretion of the one rendering the service. This rule applies also to a retailer who has the service performed by others. When a claim of product failure is made against a retailer, inclusion of the cost of the service involved in any adjustment or settlement to be made shall be at the discretion of the retailer.

N. Unauthorised Service

When service is rendered which was not authorised by the customer and such service has caused a change in appearance from the original that is not acceptable to the customer, such change shall be treated the same as damage caused by negligence or inadvertence. For example, an unauthorised redyeing of a garment to an undesirable colour is regarded the same as colour damage.

Use of Guide for Income Tax Office

Income tax authorities have stated that Table II of the guide may be used for the purpose of determining the “fair market value” of used textile products contributed to charitable organisations. To do this, apply the same procedures of calculation as for adjustments. (See: Step by Step Use of Tables.)

Generally, the single formula of 15% of replacement cost is an acceptable basis of valuation for used articles. The reasoning is that most items given to charity have exceeded their normal period of life expectancy and have entered the residual-value period which continues as long as the article is in useful condition.