Tressler LLP is pleased to present the updated 50 State Survey on “Methods of Calculating Actual Cash Value of a Claim [1],” published by Todd Schenk [2], Todd Rowe [3] and Aon Hussain [4].
Many property insurance policies provide for payment of a claim on an actual cash value (ACV) basis, at least until the damaged property is repaired or replaced. Unfortunately, many policies do not define “actual cash value.” Litigation, thus, often arises regarding the definition of ACV when a policy is silent on the definition. States use three types of tests to calculate ACV when a property policy fails to define the term: (1) the fair market value; (2) replacement costs minus depreciation; and (3) the broad evidence rule.
This survey, first published in October 2015, assists insurers in determining what test applies in calculating ACV when it is not defined in a policy. This survey also includes information pertaining to depreciation. Recently, questions have arisen regarding whether non-material items like labor and general contractor overhead and profit may be depreciated when ACV is calculated. Because the question of whether labor or overhead and profit are depreciable is still an emerging issue, not every jurisdiction has addressed it. Within this survey, Tressler has noted those states that have addressed the issue of whether depreciating labor or overhead is allowable in determining ACV. Tressler’s survey is only intended to provide an initial point of reference when faced with questions related to the calculation of ACV.
For more 50 State Surveys, visit Tressler Surveys [5].