South Carolina courts have not used the phrase “broad evidence rule” in addressing actual cash value, and the South Carolina Department of Insurance considers actual cash value to be the amount needed to repair or replace the damage minus a deduction for depreciation.1

The seminal decision is South Carolina Electric & Gas Company v. Aetna Insurance Company,2 where a fire in one of the insureds generators caused damage:

There was testimony to the effect that the actual cost of the new coils, in place, was $132,181, of which $90,300, representing the cost of materials, would be depreciable, and the balance, $41,881, representing cost of winding and installation, would not be depreciable. The cost of the new materials, depreciated to sixty (60%) per cent to conform with the depreciated life of the old as above mentioned, would be $54,180. Addition to this figure of the undepreciable $41,881 of replacement cost, would indicate that the actual cost of the new coils, in place, after depreciation, was $96,061, a figure substantially higher than the jury’s verdict . . . .

* * *

Based on a forty per cent depreciation, the actual cost of the new coils in place, as before mentioned, was $96,061. Calculating depreciation at fifty per cent (as suggested by the testimony of Mr. Kindelberger, the field service engineer of Westinghouse), the actual cost of the new coils in place was $87,031. The verdict, $87,000, is in our opinion not vulnerable to the charge of excessiveness requiring a new trial absolute.

Emphasis added.

Using the above evidence, the Supreme Court of South Carolina determined that the actual cash value was the amount it would cost the insured to replace the old stator coils with others of like kind and value as of the date of loss, depreciating materials only and not allowing depreciation of labor. More specifically, the precise formula used by the Supreme Court to approve the verdict was:

Cost of replacement materials___________________________________________$90,300
Depreciation to conform to depreciated life of old materials____________50%
Value of old materials on date of loss___________($90,300 x 50%)________$45,150
Value of winding and installation of replacement materials_____________$41,881
Actual cash value under supreme court’s formula_($45,150+$41,881)__$87,031
Approved verdict for policyholder_______________________________________$87,000

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1 Bulletin No. 2014-08. Available at, https://www.doi.sc.gov/DocumentCenter/View/7667/2014-08–Competitive-Insurance-Act
2 South Carolina Electric & Gas Co. v. Aetna Ins. Co., 120 S.E. 2d 111, 118 (S.C. 1961).

  • Stephen Sarasohn

    The court can rule that depreciation only applies to materials, and not to labor, but the logic escapes me. If the life expectancy of the stator coils is 50 years, the life expectancy of the labor expended to install the stator coils is also 50 years. After 50 years pass and new coils are installed, the original labor, like the original coils, has no value. Did the original labor not depreciate for 50 years and then depreciate 100% on the day the new coils were installed? If you were going to make an offer to buy a building today and you knew that the HVAC system had to be replaced tomorrow, how much value would you assign to the labor used for the previous HVAC installation?