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 fair market value of the property at the time of the loss is far less than the amount of money it will take to repair the property minus depreciation?
Continue Reading Does Actual Cash Value Mean Fair Market Value or Replacement Cost minus Depreciation?

Recently we received a request from a reader inquiring as to who has the responsibility to determine whether a sustained covered loss to a dwelling can be repaired or must be replaced? We always urge a thorough reading of the policy first, to determine what coverages exist, but not all policies are clear. Here’s a breakdown of the law in New York.
Continue Reading Repair or Replacement Cost as a Measure of Indemnity in New York

A recent class action lawsuit filed in Pennsylvania1 raised an issue that policyholder advocates and public adjusters see all over the country – insurers that try to exclude overhead and profit from property damage claim payments made on an actual cash value basis.
Continue Reading Are Insurers Required to Pay Overhead and Profit for Payments Made on Actual Cash Value Basis?

I recently was involved in a lawsuit in which the insurer paid for some of the costs incurred by the insured in repairing his building following a loss. The insurer’s payment was based on a repair cost estimate prepared by its independent insurance adjuster. The insurance policy provided for payment of a loss on a “replacement cost” basis. The only limitations or conditions on the payment of replacement cost benefits were (1) the repairs must be made within a reasonable time after the loss and (2) the payment will not exceed the amount spent on the repairs. Both requirements were satisfied in my case. The repairs were completed within a few months of the loss and the insured was not seeking to recover more than the amount spent on the repairs.
Continue Reading Is a Repair Cost Estimate Relevant When Repairs Are Based on Actual, Incurred Costs?

The California Supreme Court issued a unanimous ruling yesterday requiring insurers to communicate “complete” replacement cost estimates to insureds.1 The ruling not only found the regulation requiring this action to be well within the Insurance commissioner’s authority, but found the basis for the regulation to be well founded. It is a wonderful victory for policyholders in California.
Continue Reading Insurers Must Provide Complete Replacement Cost Estimates

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 so the insurance customer is not “ripped off” by taking too much depreciation?


Continue Reading Determining Depreciation–Are Policyholders Getting Ripped Off?

My colleague Ed Eshoo recently wrote a blog addressing how Illinois courts follow the Prevention Doctrine (if an insurer prevents or hinders an insured from complying with the condition to repair/replace the property before being entitled to full replacement cost, then the insured’s failure to repair/replace won’t necessarily bar a recovery of full replacement costs at the time of trial) (See Illinois Courts Follow the “Prevention of Performance” Doctrine).

Ed’s article reminded me of a case in California that addresses the same issue, but from a different angle: What happens when an insurer prevents or hinders an insured from complying with the repair/replace condition in an insurance policy and the insured does not make a demand for Actual Cash Value (“ACV”) or present evidence of an ACV estimate at any time? Under these circumstances, will the insured be entitled to recover both ACV (money to be used as “seed” money to fund the repairs) and full replacement cost coverage (“RCV”) after the repairs are completed?


Continue Reading Why Focusing Recovery Efforts on RCV Only Can Prove Disastrous for Insureds Who Fail to Make a Demand and Present Evidence of ACV

The California Supreme Court will soon decide an issue of great importance to California property policyholders: Whether insurers should be required to communicate “complete” replacement cost estimates to insureds when selling homeowner policies.


Continue Reading California Supreme Court to Decide Whether Insurers Should be Required to Communicate “Complete” Replacement Cost Estimates to Insureds When Selling Homeowner Policies

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.

Continue Reading Connecticut Values Actual Cash Value as Replacement Cost Value Minus Depreciation