When we talk about Florida’s definition of actual cash value, we are really talking about a promise of indemnity. That promise lies at the heart of the Florida Supreme Court’s 1949 decision in Glens Falls Ins. Co. v. Gulf Breeze Cottages. 1 It is one of the most important yet frequently misunderstood cases in Florida’s property insurance history. Many in the industry cite it to justify depreciation deductions, but a close reading of the opinion shows that it actually teaches the opposite lesson: when the loss to real property is partial and repair rather than replacement is the appropriate measure, depreciation does not apply.
In an earlier post that references numerous articles on the issue, Do You Have a Florida Property Insurance Dispute Over Valuation? Understand the Differences Between Replacement Cost Value, Actual Cash Value and How the Broad Evidence Rule Works, I discussed how Florida developed its approach to determining ACV. In Florida Replacement Cost and Actual Cash Value: A Study by Michael Cassel, I examined Cassel’s insightful analysis of how these doctrines evolved as replacement cost coverage became more widespread. And in An Important Florida Case Regarding Actual Cash Value of a Partial Repair and Coinsurance / Sound Value, I revisited the pre-replacement cost era, when courts focused on restoring habitability and function rather than simply deducting numbers on a spreadsheet.
Glens Falls arose from hurricane and hail damage to cottages insured under a policy that contemplated repair rather than replacement. The insurer argued that even when the damage was repairable, depreciation should be deducted from the cost of repair.
The Florida Supreme Court rejected the insurance company’s argument outright. The chancellor, whose reasoning the court affirmed, found that “the correct measure of compensation for partial loss would be the cost of economical repair, not exceeding, however, the value,” and that “sound value should be arrived at by replacement cost, less depreciation.” But when it came to the actual repairs, the court declared that “compensation for damage to this roofing should be the amount required to make the most economical repair, without applying depreciation.”
That distinction is critical. Glens Falls does not stand for the idea that depreciation should always be deducted from every repair. It stands for the principle that in partial loss situations where repair restores the property to a habitable condition, depreciation is not part of the indemnity calculation. The contract’s purpose, the court explained, was to “indemnify the owner against loss,” not to leave them worse off by forcing them to bear the cost of age-related deductions on new materials required to make the property whole again. To apply depreciation to repair would cast “upon the owner an added expense which we do not believe was contemplated by the parties when they entered into the insurance contract.”
This reasoning aligns squarely with the doctrine of true indemnity. The goal is not to deliver a property patched together with mismatched materials, nor to produce a number divorced from reality. It is to return the insured to the position they occupied before the loss, no better, but certainly no worse. And that brings us to the issue of matching.
Older case law, including Glens Falls, never suggested that “matching” of damaged and undamaged property should be ignored when determining actual cash value. To the contrary, the entire reasoning of the case assumes that restoration means repair in a way that makes the property whole.
Matching is inherent in that principle. If an adjuster excludes matching considerations when calculating ACV, then indemnity is not accomplished. Replacement cost cannot be correctly calculated without accounting for what it actually costs to make the repair blend with the undamaged portions. Only after determining that full, realistic replacement cost can any appropriate depreciation be considered, if it is even appropriate to allow for depreciation.
Florida’s older jurisprudence, long before replacement cost policies became common, understood that point intuitively. Glens Falls teaches that when repair is sufficient to restore a structure, the cost of that repair must be considered in its practical and aesthetic context. Ignoring matching not only distorts the economics of the claim, it undermines the core promise of insurance.
No insurers taught their adjusters to ignore matching considerations until recent Florida-based insurers started to advance this argument within the last decade. You will find that insurance treatises teaching adjusters how to adjust property insurance claims teach that matching has to be considered. Indeed, it is so important that the Model Unfair Claims Practice Act has long recognized it is improper to leave out considerations of matching, as noted in Don’t Let Insurers Play the Mismatched Game: NAIC Standards Require Matching and Uniform Appearance.
Tomorrow, I will illustrate this principle with a hypothetical that shows how absurd it becomes when matching is excluded from an ACV calculation. But for today, the lesson from Glens Falls is clear: Florida historically viewed indemnity to require considerations of restoration, and restoration cannot be accomplished through depreciated or mismatched repairs. Florida’s courts knew that in 1949. We are allowing Florida jurists to come to wrong conclusions when we fail to properly show how ACV was historically calculated, including considerations of matching.
For those interested in this topic, I strongly suggest reading Reflection About Historical Policy Change and Depreciation of Partial Losses Requiring Only Repair.
Thought For The Day
“Justice consists not in being neutral between right and wrong, but in finding out the right and upholding it, wherever found, against the wrong.”
— Theodore Roosevelt
1 Glens Falls Ins. Co. v. Gulf Breeze Cottages, 38 So.2d 828 (Fla. 1949).
