Ed Eshoo is an excellent trial attorney. He gave a speech today with Stephanie Lee of Coppermark Adjustment at the First Party Claims Conference, Understanding Replacement Cost, ACV, Functional Replacement Cost and The Broad Evidence Rule. These concepts are at the core of property insurance adjustment and must constantly be studied because of changing policy language and case law.

Some state departments of insurance have made regulatory pronouncements on the practice by some insurance companies taking depreciation on labor to determine actual cash value. Eshoo noted that Vermont has a bulletin preventing this, which states:

This Bulletin relates to the depreciation of labor expenses when adjusting property loss claims. Depreciation is a decline in a property’s value because of use, wear, obsolescence, or age. Labor, unlike physical materials, does not break down or lose value over time.

It is the Department’s position that depreciation of labor costs is prohibited by 8 V.S.A. § 4724(9)(F) and therefore is an unfair claim settlement practice in violation of 8 V.S.A. § 4723 (the Vermont Insurance Trade Practices Act) when committed or performed with such frequency as to indicate a business practice. While the value of the property as a whole may be considered in order to put a claimant in the same position as the claimant was before the loss occurred, labor of any kind related to the repair, rebuilding or replacement of covered property should not be subject to depreciation.

Insurers are reminded that the justification for the adjustment of a claim must be contained in the claim file. Title 8 V.S.A. § 3568 requires that every insurer preserve their business records in accordance with the rules adopted under this section. Additionally, Regulation 99-1, Section 4(A)(3) specifically requires that all claims records be maintained so as to show clearly the inception, handling and disposition of each claim. Claim records must document the adjuster’s determination of the amount of any depreciation as it relates to that specific claim.

Property insurance adjusters should remember to check for bulletins regarding various state departments of insurance that impact how claims should be adjusted.

The First Party Claims Conference was a big success and sold out with many late arrivals. The Conference will return to the Encore Boston Harbor Resort next year from December 4-6, 2023. This new venue made the after-hours networking a lot more fun and, for most gamblers, much more expensive.

If you have questions about replacement costs and actual cash value, be sure to follow up with Ed Eshoo.

Thought For The Day

Casino gambling is colorful and dramatic and theatrical.
—Steve Wynn