We are in week twenty-one of this blog series. This week, let’s look at Arkansas.

In Arkansas, the test for calculating actual cash value is replacement cost minus depreciation.

The Arkansas Supreme Court was called upon to answer a certified question of law from the U.S. District Court for the Western District of Arkansas, asking whether an insurer in determining the “actual cash value” of a covered loss under an indemnity insurance policy may depreciate the costs of labor when the term “actual cash value” is not defined in the policy. The court answered “No.”1 The Arkansas Insurance Department has also issued Bulletin No. 13A-2013, dated July 18, 2013, that provides “labor of any kind related to the repair, rebuild, or replacement of covered property cannot be depreciated.2

In Arkansas, it is likely that overhead and profit cannot be depreciated based on the language provided by the Arkansas Insurance Department: “only materials are subject to depreciation for calculating ACV payment.”3

1 Adams v. Cameron Mut. Ins. Co., 2013 Ark. 475, 430 S.W.3d 675 (2013).
2 http://www.insurance.arkansas.gov/Legal/Bulletins/13A-2013.pdf (emphasis in original).
3 Id. (Emphasis added).