It was an exciting down to the wire finish on Monday night for the NCAA basketball championship. Congratulation to Villanova! This week my blog in the series on calculating actual cash value will focus on Pennsylvania.

In Pennsylvania, actual cash value has consistently been interpreted to mean repair or replacement costs less depreciation.1

In Gilderman v. State Farm Insurance Company,2 the Superior Court held that where an insurance policy provides that the insurer will pay repair and replacement costs and that it will pay actual cash value in advance of actual repair or replacement of a covered loss, the insurer may not automatically withhold both depreciation and a flat 20% representing contractor overhead and profit from its advance payment.

Another issue that comes up when discussing ACV is whether labor can be depreciated. In Pennsylvania, for partial losses, the answer is no:

[I]n partial loss situations, in the absence of clear language to the contrary, an insurer may not deduct depreciation from the replacement cost of a policy and that the phrase ‘actual cash value’ may not be interpreted as including a depreciation deduction, where such deduction would thwart the insured’s expectation to be made whole.3

We are nearing the halfway point in the number of states covered in this series. Feel free to send me an email or leave a comment below with a request for the next state I will address in this blog series.

1 Gilderman v. State Farm Ins. Co., 649 A.2d.941, 945 (Pa. Super Ct. 1994).
2 Id.
3 Kane v. State Farm Fire & Cas. Co., 2003 PA Super 502, ¶ 19, 841 A.2d 1038, 1047 (Pa. Super. 2003).