On August 1, 2017, The Arkansas Insurance Department issued Bulletin 10-2017 that rescinds Bulletin 13-B-2013.1 Specifically, Bulletin 10-2017 states “any prior communications or notices from the Arkansas Insurance Department. . . that prohibited depreciation of labor, are hereby rescinded.”
Bulletin No. 10-2017 provides that an insurer may allow expense depreciation when determining a loss under an insurance policy covering damaged property. “Expense Depreciation” means depreciation, including but not limited to the cost of goods, materials, labor, and services necessary to replace, repair, or rebuild damaged property.
The bulletin further states:
Expense depreciation shall not be applied to policies currently in effect, however, if the following required steps are taken, it may be applied upon renewal or at inception.
1. Insurers are required to provide notice, within the insurance policy, that expense depreciation may be deducted. The content and placement of this notice shall be approved by the Insurance Commissioner.
2. If the current policy does not contain the broad depreciation allowance language as provided in Act 279 of 2017, then the actual policy contract language shall be modified before being allowed.
3. The policy shall include a provision defining depreciation to include “expense” depreciation.
4. Once the Insurance Commissioner approves of the language, the contract modification on existing policies becomes effective at renewal and at inception for new policies.
1 Bulletin 13B-2013: “Labor of any kind related to the repair, rebuild, or replacement of covered property cannot be depreciated”