Many Virgin Islands property owners have submitted claims to their property insurance carriers relating to claims from Hurricanes Irma and Maria. One issue that may arise during the adjustment of the claim is how the insurance carrier will calculate the “actual cash value” damages to the property.
In the Virgin Islands, this issue has not yet been heavily litigated and there are not many cases discussing this concept. According to the Virgin Islands Division of Banking, Insurance and Financial Regulation, actual cash value is defined as “an amount equal to the replacement cost of lost or damaged property at the time of the loss less depreciation (ACV = replacement cost – depreciation).”1
A heavily debated issue right now in several jurisdictions nationwide is whether labor should be depreciated in the context of actual cash value policies. The Virgin Islands Division of Banking, Insurance and Financial Regulation provides in their “glossary” this definition of depreciation: “a decrease in the value of any type of tangible property over a period resulting from use, wear and tear, or obsolescence.” This description supports the interpretation by several courts that labor is not a physical thing that can deteriorate.
As Hurricane Irma and Maria claims are litigated over the next several years, calculating actual cash value will likely be discussed.
Our blog will continue to be a resource on property insurance issues in the Virgin Islands. The best way to find other posts regarding the Virgin Islands is to use the search function at the top right corner of this webpage.