Tag Archives: Depreciation

California Supreme Court Affirms California Fair Plan Ass’n v. Garnes, and Preserves Homeowners’ Interests

The California Department of Insurance recently issued a press release announcing that the California Supreme Court affirmed the homeowner reimbursement protections recently decided in California Fair Plan Association v. Garnes.1 Back in June, my colleague Kevin Pollack wrote about the recent decision and whether actual cash value means fair market value or replacement cost minus … Continue Reading

Few Judges and Insurance Regulators Worked in Property Claims: Understanding New Depreciation Rulings

Most judges and insurance regulators have never worked in property insurance claims departments. For that matter, few insurance attorneys have either (Merlin Law Group’s Javier Delgado worked his way through school as an independent adjuster). But, when I was starting out, an older and experienced GAB adjuster told me they never depreciated labor and the … Continue Reading

Colorado Joins a Growing List of Jurisdictions Allowing Depreciation of Labor Costs When Determining Actual Cash Value

While I often argue that depreciating labor simply does not make sense, insurers continue to push the question of whether the depreciation of labor costs in Actual Cash Value policies is acceptable. Though several jurisdictions have rejected the depreciation of labor, surprisingly, the recent trend of jurisdictions touching upon the subject has been to allow … Continue Reading

Does Actual Cash Value Mean Fair Market Value or Replacement Cost minus Depreciation?

What is an insured, who has an “actual cash value” property insurance policy, entitled to recover when their property is damaged, but not a total loss? Is the insured entitled to the cost to repair/replace the property minus depreciation? Or is the insured’s recovery limited to the property’s fair market value? What if the property’s … Continue Reading

Personal Property Depreciation by the Insurance Company After a Loss Should be Scrutinized by Policyholders

I often hear the same complaint from clients: They feel the insurance company has undervalued their personal property after a loss and are frustrated by the insurance company’s valuation and rate of depreciation. The reality is that even when an insured has a “replacement cost” policy, the insurance company can depreciate personal property values because … Continue Reading

Depreciation of Labor Costs

A common question by insureds has to do with depreciation, and how it is defined when calculating an Actual Cash Value (“ACV”) payment for property loss. For an underlying discussion of Depreciation Values, I direct you to Chip Merlin’s post on November 21, 2016: Determining Depreciation–Are Policyholders Getting Ripped Off?… Continue Reading

Calculating Depreciation: Are Generic Tables Reliable or Based on Any Scientific Study?

Depreciation tables were first introduced to me when studying accounting at the University of Florida. The tables were based on tax schedules and other accounting methods which usually had nothing to do with the actual depreciation of an item. Indeed, if you used tax depreciation tables, some items could be written off immediately despite little … Continue Reading

Determining Depreciation: The Definition of Actual Cash Value Varies Widely Between States

In yesterday’s post, Determining Depreciation–Are Policyholders Getting Ripped Off, I promised to discuss issues of actual cash value and depreciation. The article I am critiquing giving rise to this discussion cited California law regarding actual cash value and then made this statement: In states in which condition is not included in the definition of actual … Continue Reading

Determining Depreciation–Are Policyholders Getting Ripped Off?

Many property insurance company adjusters are required by their companies to determine the amount of depreciation to be taken when arriving at amounts of actual cash value. Many are told to determine this amount by determining the replacement cost and then subtracting depreciation. The question is: How are property insurance adjusters trained to determine depreciation … Continue Reading

Age as a Factor in Determining Depreciation Used to Calulate Actual Cash Value

In Lains v. American Family Mutual Insurance Company,1 a federal district court in Washington considered two issues involving actual cash value: whether American Family improperly considered age in depreciating the insureds’ personal property loss, and whether American Family improperly depreciated labor costs as applied to the insureds’ dwelling loss. The American Family policy defined “actual … Continue Reading

In Missouri, ACV For Fire Losses Looks To Fair Market Value, But For Other Losses ACV Is Replacement Cost Minus Depreciation; Plus, Labor Costs Are Not Subject To Depreciation

In researching an issue for a Public Adjuster, I came upon this gem of a case. In Missouri, the argument has always been that when calculating actual cash value you must use fair market value. This is not a good thing for most insureds, especially in big losses. It usually means a meager payment up … Continue Reading

Commercial Marine Insurance and Depreciation on Engines

When Hurricanes hit, residential and commercial property are commonly considered when you think of the insurance losses. But in coastal states hurricanes can also have a devastating impact on commercial and recreational marine losses. As with residential and commercial property, you need to be sure you review and understand your boat’s insurance policy. It is … Continue Reading

Connecticut Values Actual Cash Value as Replacement Cost Value Minus Depreciation

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 … Continue Reading

Depreciating Labor is Against Public Policy When Calculating Actual Cash Value

The Arkansas Supreme Court ruled last week that depreciating labor is against public policy when calculating the actual cash value of a loss.1 This was despite insurance policy language permitting the practice. This will undoubtedly generate class action lawsuits against insurers engaged in this practice and cause some claims managers to question if they should … Continue Reading

Are Overhead, Profit, and Sales Tax Subject to Depreciation in Texas?

I am often asked whether an insurer can depreciate overhead, profit, and sales tax when it makes an Actual Cash Value (“ACV”) payment under a Replacement Cost Coverage policy. The thinking goes that only the materials used to build a structure can be depreciated because overhead, profit, and sales tax do not lose value over … Continue Reading

Depreciation: One Perspective on Calculating Actual Cash Value

Many insurance policies include a section titled "Definitions," which defines certain terms used throughout the policy. The meanings of those terms are frequently the subject of litigation. A perfect example is the case I write about this week. Despite the fact that Actual Cash Value ("ACV") is usually a term that is defined or explained … Continue Reading

Liberalization Clauses are Very Helpful to Policyholders, But A Florida Court Takes a Consevative View

Segal v. Hartford Ins. Co., No. 09-10588, 2009 U.S. Dist. LEXIS 13215 (11th Cir. June 18, 2009) Most insurance policies contain a liberalization clause. Always look for them because a liberalization clause means that any change in the law broadening coverage would benefit the policyholder, even if the change happened in the middle of a … Continue Reading