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Can the work be depreciated when considering the actual cash value? | Property Insurance Coverage Law Blog



1 Merlin Law Group participated in this victory for policyholders by writing a amicus curiae Merlin Law Group participated in this victory for policyholders Card for United Policyholders' behalf.

The Court's conclusion and justification are direct:

Ultimately, it is not necessary for the court to decide whether the work can be logically depreciated or if compensation is achieved. It is enough that we find the agreements ambiguous and that according to our standard for review, the interpretation of the insured must prevail. We conclude that the answer to the district court's certified question is no, the insurance company cannot withhold part of the labor costs as depreciation according to one of the political guidelines.

. . . . .

We conclude that the language of depreciation in the current policy is ambiguous. According to the Tennessee law, ambiguities in insurance contracts are strictly interpreted against insurance companies and in favor of the insured. Therefore, the insured's interpretation control cannot be depreciated when the insurance company calculates the actual cash value of a property by means of the replacement cost, less the depreciation method.

The officials in Tennessee suggested that they simply found that the policy was ambiguous and did not need to base the decision on other grounds. Similarly, we argued on behalf of the US policyholders that the policy was ambiguous:

To the extent that there is ambiguity in the current policy in this case, this ambiguity must be resolved to the policyholders' side. If the language of an insurance policy is quite susceptible to more than one sentence and therefore ambiguous, the Tennessee law states that the ambiguity is interpreted against the car owner and in favor of the plaintiffs. Tata v. Nichols 848 SW2d 649, 650 (Tenn. 1993).

It is illogical to assume that insured, such as the plaintiffs in this case, could conclude that the work would be depreciated from an ACV coverage policy when the term "real cash value" has no definition. See Adam J. Babinat, Secure Compensation: Why Insurers Should Stop Depriving Work 22 Drake J. Agric. L. 65, 78, 85 (spring 2017) (recommend that Iowa adopt a regulation similar to California, that the expense of labor to repair, build or replace damaged property is not part of physical depreciation.) Here, Auto – Users would place a burden on insured persons, which unfairly owns vehicle owners ….

Allowing insurers to write off labor would violate policyholders' reasonable expectations, would cause them significant financial damage and would create a fall for insurers. The policyholders' reasonable expectations are that the remuneration policies they purchased will provide sufficient coverage to actually replace them or put them back in the position they were in before the loss. If the policyholders' property had a roof before the loss requires compensation that they are paid depreciated value of roofing materials and the costs of installing the depreciated materials. As discussed in the plaintiff's brief, the Tennessee Department of Insurance has also stated that "generally speaking, the belief is that the work is not depreciable" and that "it does not believe that insurers are deteriorating labor unless their [insurance policy] demands it

There are other reasons for not writing off labor, including but not limited to, as we noted:

National Underwriter Company publishes under the name of FC & S, or Fire, Casualty & Surety, an extensive library FC & S also provides online bulletins where experts respond to questions from insurance personnel.The bulletin is used by insurance agents and brokers to interpret standard insurance regulations. FC & S has stated that its position is that depreciation should not apply to labor unless one policy explicitly states that it should. FC & S Bulletin, Should le depreciation is applied to costs for demolition, cleaning and odor cost after a fire loss? (Nat & # 39; s Underwriter Co. December 5, 2014).

Car owners and other insurance companies should not get the benefit of a term that they chose not to define in their policy. Also, the International Risk Management Agency ("IRMI"), an independent insurance industry that provides risk management instructions and the insurance industry on the application of policy rules, has stated that if an insurance company wants its own interpretation to apply, it may define that term in its own policy. Mike McCracken, International Risk Management Institute, Inc., What exactly is actual cash value? Better than, how do you calculate it? available at https://www.irmi.com/articles/expert-commentary/what-exactly-isactual-cash-value (Dec. 2007).

The only worrying part of the decision is that it seems to invite the insurance industry's strong lobby gallery to convince insurance authorities that insurance companies can write policies that specifically lower the labor force. These discussions and submissions are often made quietly and without public comment. Most of these insurance regulators come from – or eventually seek jobs with the insurance industry.

The thought of the day

The work is before and independent of, the capital. Capital is just the fruit of labor, and could never have existed if the work did not exist first. Work is the superior of capital, and deserves much higher consideration.
-Abraham Lincoln
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1 Paralyzed against Car Owners Ins. Co. No. M2017-02546-SC-R23 CV (Tenn, April 15, 2019).


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