Whether your insurance company forced you to sift through soot and ash, trying to recollect what has just been stolen, or trying to identify items damaged by water, going through damaged contents and creating an inventory is an emotionally draining experience that typically comes with little to no guidance by the insurance company. After spending countless hours substantiating lost personal property contents, the insurance company responds with random, and sometimes substantial reductions in the value of the personal property for depreciation, often with little to no explanation as to how it arrived at that conclusion.
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While the term actual cash value is typically found in a property insurance policy, it often is not defined in the policy. Courts around the country use four primary methods to give meaning to the term actual cash value when it is not defined in an insurance policy. Those methods are:

(1) replacement cost without deduction for depreciation;

(2) market value;

(3) replacement cost with deduction for depreciation; and

(4) the broad evidence rule.
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The Broad Evidence Rule has been used in Connecticut to calculate Actual Cash Value (ACV) on property damage cases since 1959.1 That all changed in 2011 when the Connecticut House of Representatives passed Substitute House Bill No. 6238. This bill nullified the Broad Evidence Rule and instead calculated ACV for homeowners and commercial risk insurance properties by taking the Replacement Cost Value and deducting depreciation to obtain ACV.

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(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the fourth in a series she is writing on valued policy laws).

“Actual Cash Value = Replacement Cost – Depreciation” is one of the most common insurance valuation mantras. However, when dealing with Actual Cash Value (ACV) provisions, insurance professionals should keep in mind that that, in Florida, this formula is more fluid and lenient than it sounds.


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