After attending the 16th Annual Windstorm Insurance Conference in New Orleans this past week along with many of my colleagues, I thought it appropriate to review the calculation of actual cash value in Louisiana.
Louisiana courts calculate actual cash value as replacement cost less depreciation.
In Nguyen v. St. Paul Travelers Insurance Company,1 the plaintiffs owned property that was damaged as a result of Hurricanes Katrina and/or Rita. They commenced a breach of contract claim against their insurer. The plaintiffs’ claim was that they were entitled, under the loss provision of the policy, to receive the actual cash value of their damaged property and that when the insurer settled with them on an actual cash value basis, it did not pay them the full amount due because the insurer underpaid overhead and profit. The Eastern District of Louisiana court agreed with Plaintiffs that actual cash value is equal to replacement cost value less deprecation, and replacement cost value must account for the impact of Hurricanes Katrina and Rita on the costs of supplies and labor, including overhead and profit costs.2
Because the Nguyen court was considering a motion to dismiss, the court noted:3
“At the very least, plaintiffs needed to allege that it was reasonably likely they would need the services of a general contractor, or allege some basis in the facts or the contract language demonstrating an entitlement to overhead and profit as part of their insurance payment.”
Stay tuned for next week when I discuss the method of calculating ACV in Texas.
1 Nguyen v. St. Paul Travelers Ins. Co., No. CIV.A. 06-4130, 2007 WL 3275133 (E.D. La. Nov. 5, 2007).
2 Id. at 2-3.
3 Id. at 7.