In a recent post, If Commercial Property Repairs Cost Less Than ACV, Does the Insurance Company Get the Difference Back, we discussed The Breakwater Commons Association, Inc. v. Empire Indemnity Insurance Company and the distinction between actual cash value and replacement cost under a commercial property insurance policy.
That litigation has now reached the Eleventh Circuit.
The district court confirmed the appraisal award in Breakwater’s favor and entered final judgment for $8,101,766.49 in unpaid actual cash value, plus $833,771.54 in prejudgment interest. Empire appealed. The pending appeal is The Breakwater Commons Association, Inc. v. Empire Indemnity Insurance Company, (11th Cir. Case No. 26-12548).
The central dispute is no longer whether Breakwater is entitled to an actual cash value payment. Empire’s argument concerns what qualifies as actual cash value in the first place.
Empire’s Definition of ACV
The Breakwater appraisal panel determined the covered loss at $12,965,666.59 on an actual cash value basis and $14,692,974.23 on a replacement cost basis. The difference between those figures was approximately $1.73 million in depreciation.
Empire did not accept the panel’s ACV determination. It asserted that the appraisers improperly included future and contingent stucco, drywall, painting, permitting, and general-condition costs associated with replacing damaged windows and doors. Empire reclassified those amounts as replacement cost or ordinance-and-law benefits that would not become payable until Breakwater completed the work.
After making its own adjustments to the appraisal award, Empire paid what it called a corrected ACV award of $4,763,526.43. Breakwater sought the balance of the ACV amount actually determined by the appraisal panel.
Judge Kyle Dudek rejected Empire’s attempt to remove selected components from the appraisal award. The court relied on the finality of appraisal and the rule that an insurer cannot accept an appraisal’s overall valuation while unilaterally deleting particular components it believes the panel misclassified. The court confirmed the remaining ACV balance.
The decision requires careful reading. The court did not hold that every stucco, drywall, painting, permitting, or general-condition expense necessarily constitutes ACV under every policy. It held that Empire could not selectively rewrite the binding appraisal award after it was entered. Empire’s appeal may therefore be resolved under appraisal law without the Eleventh Circuit adopting a comprehensive definition of ACV.
Nevertheless, Empire’s argument in Breakwater is part of a broader trend. Insurers are attempting to create a category of repair expenses they call conditional RCV, indirect costs, or anticipated future repair costs. Under that theory, ACV includes only the depreciated value of materials that sustained direct physical damage. Labor and other work necessary to repair or replace those materials allegedly become payable only after the repairs occur.
That is a substantial change from the traditional distinction between ACV and replacement cost.
The Recent Cases Raising This Issue
- Vazquez v. Citizens Prop. Ins. Corp., 304 So. 3d 1280 (Fla. 3d DCA 2020). The insured claimed approximately $70,000 to replace undamaged flooring and cabinetry so those items would match a small amount of damaged tile and one damaged cabinet. The Third District held that projected matching costs were not part of the initial ACV payment.
- Bain v. Hartford Ins. Co. of the Midwest, No. 19-CV-25038, 2022 WL 22873389 (S.D. Fla. Sept. 7, 2022).The court extended the reasoning beyond aesthetic matching. It excluded the cost of tearing out and replacing undamaged property needed to access a covered plumbing repair until the insured performed the work. The decision relied heavily on Vazquez and Homeowners Choice Property & Casualty Insurance Co. v. Maspons, 211 So. 3d 1067 (Fla. 3d DCA 2017).
- Citizens Prop. Ins. Corp. v. Salazar, 388 So. 3d 115 (Fla. 3d DCA 2023). The Third District Court of Appeal reversed a judgment because the insured relied on a replacement-cost estimate containing matching expenses without presenting a separable ACV calculation. Like Vazquez, Salazar concerned projected matching costs.
- Marquez v. Clear Blue Specialty Ins. Co., 758 F. Supp. 3d 1338 (M.D. Fla. 2024). The court granted a motion in limine limiting damages evidence to ACV and excluding replacement cost and matching. The insureds did not file a response to the motion. The decision should therefore carry less persuasive force than a ruling entered after full adversarial briefing.
- Great Lakes Ins. SE v. Ming & Kwang Dev. Corp., No. 2:24-CV-00451, 2025 WL 2508883 (M.D. Fla. Sept. 2, 2025). Great Lakes sought to require an appraisal form that separately identified RCV, ACV, direct damage, indirect damage, matching, and continuity costs. The court initially allowed the declaratory action to proceed. At summary judgment, however, the court rejected the requested requirement because the policy did not require that form of delineation. A court cannot add appraisal requirements the insurer omitted from its policy.
- Funbar Hall LLC v. National Fire & Marine Ins. Co., 820 F. Supp. 3d 1337 (M.D. Fla. 2026). The court adopted a broader version of the insurer’s theory. It held that ACV was limited to property sustaining direct physical loss and treated replacement of undamaged floors, cabinetry, and roofing materials required by mechanical necessity as replacement cost recovery in disguise.
- Greenaker v. Universal Prop. & Cas. Ins. Co., 434 So. 3d 526 (Fla. 2d DCA 2026). The Second District rejected Universal’s argument that labor and other anticipated repair costs were excluded from ACV because they were intangible, indirect, future, or not themselves physically damaged. The court held that ACV describes the method used to value the entire insured loss. It does not operate as an exclusion of nonphysical repair costs.
- Breakwater Commons Ass’n, Inc. v. Empire Indem. Co., No. 2:20-CV-31, 2021 WL 1214888 (M.D. Fla. Mar. 31, 2021). Empire applied the same broader theory to stucco, drywall, painting, permitting, general conditions, and work associated with window and door replacement. Unlike Greenaker, the district court resolved the dispute through appraisal-finality principles rather than a definitive ruling about each cost category.
These cases show a progression. The argument began with replacement of undamaged property solely to achieve aesthetic matching. It then moved to tear-out and access work. It has now reached labor, installation, painting, permitting, general conditions, and other ordinary costs necessary to complete a covered repair.
How Did We Get Here
The movement did not begin with a Florida court holding that labor, painting, permitting, and general conditions are categorically outside ACV.
One early source was Ocean View Towers Association, Inc. v. QBE Insurance Corporation, 2011 WL 6754063 (S.D. Fla. Dec. 22, 2011). There, the court held that a commercial policy did not require replacement of undamaged property simply to achieve matching or uniformity. The court also enforced the policy’s requirement that the insured complete repairs before collecting replacement cost.
Another source was Homeowners Choice Property & Casualty v. Maspons, 211 So. 3d 1067 (Fla. 3d DCA 2017). That decision construed the phrase direct physical loss and held that the claimed damage must be actual. The case concerned coverage and proof of loss involving a failed plumbing system and tear-out of a concrete slab. It was not a general definition of actual cash value.
Vazquez brought these concepts together. It used the matching principle from Ocean View, and the direct-physical-loss discussion in Maspons to hold that replacement of undamaged flooring and cabinetry for matching was not part of the initial ACV payment.
That was the doctrinal pivot.
The next step was to treat all work performed on undamaged property as equivalent to aesthetic matching. Bain applied the reasoning to tear-out and access work. Funbar Hall applied it to components that allegedly required replacement because of mechanical necessity. Empire’s argument in Breakwater extends the theory to stucco, drywall, painting, permitting, and general conditions necessary to replace covered windows and doors.
But matching and repair mechanics are not the same.
Matching involves replacing otherwise functional and undamaged property to produce a uniform appearance. Access work, labor, painting, permitting, and general conditions may be necessary to complete the covered repair itself. A permit cannot sustain physical damage. Neither can labor, contractor supervision, or overhead. If every constituent cost must independently qualify as damaged physical property, no policyholder could recover the labor required to install a covered replacement.
The Departure From the Policy Language
The typical policy begins by identifying what loss is covered. It may insure against direct physical loss to covered property. That language addresses coverage.
A separate loss-settlement provision explains how the covered loss will be valued and paid. It ordinarily provides for an initial ACV payment, followed by payment of the remaining replacement cost after the insured performs the work and incurs the expense.
The disputed theory moves direct physical loss from the coverage provision into the loss-settlement provision. It then uses that phrase to exclude any expense that is not itself damaged tangible property.
The policy does not say that.
The phrase actual cash value traditionally describes a valuation method. On modern replacement-cost forms, courts commonly calculate ACV by determining the reasonable cost to repair or replace the covered damage and deducting appropriate depreciation. Replacement cost generally represents the same covered repair without the depreciation deduction.
Florida’s established authorities reflect that distinction. In Mills v. Foremost Ins. Co., 511 F.3d 1300 (11th Cir. 2008), the Eleventh Circuit held that ACV could include sales tax, contractor overhead, and profit even though the insured had not yet completed the repairs. The court distinguished between whether a type of cost falls within the cost to repair and whether the insured has shown that the particular cost is reasonable and likely to be incurred.
In Goff v. State Farm Florida Ins. Co., 999 So. 2d 684 (Fla. 2d DCA 2008), the Second District held that contractor overhead and profit form part of ACV when the insured is reasonably likely to require a general contractor.
The Florida Supreme Court approved that reasoning in Trinidad v. Florida Peninsula Ins. Co., 121 So. 3d 433 (Fla. 2013). Although the legislature later changed the statute to permit a replacement-cost holdback, it did not redefine ACV by excluding categories of labor and other necessary repair expenses.
The distinction created by the policy is generally one between depreciated and undepreciated value. It is not automatically a distinction between physical materials and every other cost of construction.
Courts Are Beginning to Limit the Expansion
Greenaker provides the clearest response to the expanded theory. Universal argued that labor and other costs needed to install covered materials were indirect, anticipated future repair costs included only in RCV. The Second District rejected that position.
The court found no support for the proposed distinction in the policy, the governing statute, or Florida’s ACV decisions. It explained that direct physical loss had been taken from the coverage provision and inserted into the loss-settlement provision. It also rejected the contention that remaining amounts means different categories of costs. In context, that language addresses when the difference between depreciated ACV and undepreciated replacement cost becomes payable.
Great Lakes applied a related policy-text principle in the appraisal context. The insurer wanted an appraisal award divided according to a taxonomy of ACV, RCV, direct damage, indirect damage, and matching. The policy did not require that structure. The court refused to add it.
Breakwater provides a third limitation. An insurer cannot wait until an appraisal panel determines ACV and then unilaterally remove individual categories by declaring that the appraisers placed them in the wrong column.
These decisions do not mean every estimated expense belongs in ACV. The policyholder must still establish that the work is covered, reasonably necessary, supported by the evidence, and properly valued. Ordinance-and-law costs may be governed by a separate coverage provision. Purely aesthetic matching presents different questions from mechanical access and installation. Speculative or optional improvements do not become ACV merely because they appear in an estimate.
But those are coverage, necessity, and valuation questions. They do not justify inventing a third category of conditional RCV that does not appear in the policy.
The Eleventh Circuit Will Have the Next Word
Empire’s Breakwater appeal gives the Eleventh Circuit another opportunity to address the boundary between ACV and replacement cost under a Florida commercial property policy. The appeal is docketed as Case No. 26-12548.
The court may decide the case narrowly. It could hold that Empire cannot challenge selected components of a binding appraisal award without deciding whether each disputed expense independently qualifies as ACV. It could also address the broader theory Empire used to justify withholding more than $8 million of the appraisers’ ACV determination.
Either way, the appeal deserves close attention. The issue is no longer simply whether a policyholder is entitled to ACV before completing repairs. The developing dispute concerns whether an insurer may redefine ACV so narrowly that it excludes the labor, access, coordination, and related work required to perform the covered repair.
The policy language should control that question. Conditional RCV should not become a substitute for words the insurer never placed in the contract.
Stay tuned.
