Insurers in South Carolina may now depreciate both labor costs and material costs when determining the “actual cash value” (ACV) owed to policyholders for property damage. In Miriam Butler et al. v. Travelers Home and Marine Insurance Co. et al., Case No. 2020-001285 (S.C. May 12, 2021), the South Carolina Supreme Court held that insurers may depreciate labor costs to determine the ACV of a damaged property when an insurance policy does not define ACV and the “cost to repair or replace the damaged property at issue includes both materials and embedded labor components.” Id. About The Authors
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Failure of Insured to Provide Requested Documents Triggers Appraisal Under First Party Insurance Policy
Those familiar with first party insurance policies have undoubtedly encountered a recurring issue with the interpretation of appraisal provisions – what does it mean to disagree on the amount of loss? In Valvano Realty Co. v. American Fire and Casualty Co., the United States District Court for the Middle District of Pennsylvania recently held that a disagreement on the amount of loss encompasses situations where an insurer claims it needs additional documentation before it can determine whether a disagreement exists. Valvano involved a December 18, 2015 fire at the Plaintiff’s property in Dickson City, Pennsylvania, which was insured by American. American’s adjuster, working with a retained construction consultant and structural engineer, determined the replacement cost value of the loss to…
Tagged with: Actual Cash Value, Arbitration and Appraisal, Coverage, Loss Adjustment, Replacement Cost, Valuation
Posted in Actual Cash Value, Arbitration and Appraisal
Posted in Actual Cash Value, Arbitration and Appraisal
Pennsylvania Supremes to Decide Whether Actual Cash Value Includes General Contractor Overhead and Profit
Insurance companies may no longer be allowed to rely on clear policy language that expressly excludes general contractor overhead and profit (“GCOP”) from actual cash value payments. The Pennsylvania Supreme Court recently agreed to hear argument on the issue in Kurach v. Truck Insurance Exchange, Case No. 532 EAL 2018. The facts in Kurach are undisputed. The insureds, who admittedly chose not to repair the damage to their homes, filed a class action lawsuit against Truck for its alleged breach of contract by not including GCOP in its actual cash value payments. The policies at issue expressly provided that “actual cash value settlements will not include estimated general contractor fees or charges for general contractor’s services unless and until you…
Depreciation of Labor Costs When Determining Actual Cash Value: Henn v. American Family
In February, the Nebraska Supreme Court held that it is acceptable for insurance companies to depreciate labor costs when determining the actual cash value (ACV) of damaged property, even when the insurance policy does not define “actual cash value” or “depreciation.” See Henn v. American Family Mutual Insurance Co., 295 Neb. 859 (Neb. 2017). Writing for the Nebraska Supreme Court, Chief Justice Michael Heavican concluded that all relevant facts and evidence should be used to calculate ACV, and both materials and labor constitute relevant facts to consider when establishing the value of property prior to the loss. The case dates back to a September 2011 dispute when Rosemary Henn filed a homeowner’s claim with American Family due to damage to…
Arkansas Bars Depreciation of Labor When Calculating Actual Cash Value
Over the last few years, courts have disagreed over whether labor — as opposed to materials — can be depreciated when determining actual cash value (ACV); two of our 2015 posts addressed cases in which the District of Kansas said yes while a Kentucky federal court said no. On Thursday of last week, in a split decision, Arkansas’s highest court sided with the naysayers in Shelter Mut. Ins. Co. v. Goodner, 2015 Ark. 460, 2015 WL 8482788 (Ark., Dec. 10, 2015). Two of the justices filed a vigorous descent. At the present time, the case has no LEXIS citation. The insureds owned a mobile home in Texarkana that sustained a covered loss in July of 2012. The policy provided that…
Fifth Circuit: Total Loss Amount Caps Insured’s Recovery Even Under Multiple Policies Covering Different Risks
We don’t usually cover cases dealing with Standard Flood Insurance Policies (SFIPs) issued pursuant to the National Flood Insurance Program, but a Texas case decided by the federal Court of Appeals earlier this month addresses a broader issue – where the policyholder has multiple policies covering the same property against mutually exclusive risks, such as an SFIP covering flood and a homeowner’s policy covering wind, can his or her recovery ever exceed the total loss amount. In Lowery v. Fidelity Nat’l. Prop. & Cas. Ins. Co., 2015 WL 6848323, 2015 U.S. App. LEXIS 19443 (5th Cir., Nov. 6, 2015), a unanimous panel of the Fifth Circuit answered no, in reliance on the insurance principle that bars a double recovery. The…
Tagged with: Fifth Circuit, Texas
Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm
Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm
Kansas Court Sanctions Depreciation of Labor to Determine Actual Cash Value
Two of our previous posts reported that Arkansas and Kentucky courts have now barred insurers from depreciating labor—as opposed to materials—when arriving at actual cash value (ACV). Last Wednesday in Graves v. American Family Mut. Ins. Co., 2015 WL 4478468, 2015 U.S. Dist. LEXIS 95127 (D.Kan., Jul. 22, 2015), a federal court in Kansas reached the opposite result in a case of first impression in that state, holding that ACV entails depreciating both materials and labor. A storm damaged the insured’s roof in December 2013, and she made claim under her homeowners policy. The contract of insurance called for payment on an ACV basis unless the damage had been completely repaired or replaced, and it defined ACV as “[t]he amount…
Tagged with: Kansas, Labor
Posted in Actual Cash Value, Depreciation, Homeowners Coverage, Loss Adjustment, Replacement Cost
Posted in Actual Cash Value, Depreciation, Homeowners Coverage, Loss Adjustment, Replacement Cost
Kentucky Court: Depreciating Labor to Get Actual Cash Value Is Like Making the Insured Use a Very Old Roofer With Debilitating Arthritis to Repair the Roof
Surprisingly few states have addressed the question of whether an insurer can depreciate labor – as opposed to materials – to arrive at actual cash value (ACV). Two weeks ago in Bailey v. State Farm Fire & Cas. Co., 2015 WL 1401640, 2015 U.S. Dist. LEXIS 37568 (E.D.Ky., Mar. 25, 2015), a federal court in Kentucky held that it was impermissible to do so, quoting an Oklahoma opinion that analogized such a step to requiring the policyholder to use “a very old roofer with debilitating arthritis who can barely climb a ladder or hammer a nail” to effect repairs to a roof. The case was a proposed class action by a West Liberty, Kentucky dentist whose office was damaged by…
Tagged with: Kentucky, Labor
Posted in Actual Cash Value, Depreciation, Fire, Replacement Cost, Tornado
Posted in Actual Cash Value, Depreciation, Fire, Replacement Cost, Tornado
Sixth Circuit Holds That Declines in Market Value are Not a Factor in Determining Actual Cash Value
In a case of first impression in Michigan, the federal Court of Appeals determined last month that general market conditions could not be considered when calculating actual cash value. In Whitehouse Condominium Group, LLC v. Cincinnati Ins. Co., — Fed.Appx. —, 2014 WL 2743480 (6th Cir., June 17, 2014), the contract of insurance defined ACV as replacement cost less a number of factors including “obsolescence .” The Sixth Circuit held that the word connoted only functional obsolescence as opposed to both functional and economic obsolescence. The policyholder owned a condominium building in Flint, Michigan that was heavily damaged by fire in November of 2010. The policy afforded coverage for ACV, which was defined in the contract of insurance to mean…
Tagged with: Michigan, New York, Obsolescence
Posted in Actual Cash Value, Depreciation, Fire, Loss Adjustment
Posted in Actual Cash Value, Depreciation, Fire, Loss Adjustment
Arkansas’ Supreme Court Prohibits The Depreciation Of Labor Costs Under An Actual Cash Value Policy
On November 21, 2013, Arkansas’ highest court held that “the costs of labor may not be depreciated when determining the actual cash value of a covered loss under an indemnity insurance policy that does not define the term ‘actual cash value.’” In addition, the court bottomed its decision on both the old canard of ambiguity and on the notion that depreciating labor is both illogical and inconsistent with the principle of indemnity. As a result, even a change in policy language to expressly provide for labor’s depreciation might not pass muster in the state. Adams v. Cameron Mutual Ins. Co., 2013 Ark. 475 (Ark., Nov. 21, 2013) arose after a tornado damaged the Adamses’ home in Mena, Arkansas. Their homeowners…
