Ed Eshoo is an excellent trial lawyer. He spoke today with Stephanie Lee of Coppermark Adjustment at the First Party Claims Conference, Understand replacement cost, ACV, functional replacement cost and the broad evidence rule. These concepts are at the heart of property insurance compliance and must be constantly studied due to changing policy language and case law.
Some state insurance departments have issued regulatory pronouncements on the practice of some insurance companies taking depreciation on work to determine the actual cash value. Eshoo noted that Vermont has a bulletin preventing this, which states:
This Bulletin relates to depreciation of labor costs when adjusting claims. Depreciation is a decrease in the value of a property due to use, wear and tear, obsolescence or age. Labor, unlike physical materials, does not break down or lose value over time.
It is the Department̵7;s position that the write-off of labor costs is prohibited by 8 VSA § 4724(9)(F) and therefore is an unfair claims settlement practice in violation of 8 VSA § 4723 (Vermont Insurance Trade Practices Act) when committed or carried out with such frequency that it indicates a business practice. Although the value of the property as a whole may be considered to put a claimant in the same situation as the claimant was in before the loss occurred, work of any kind related to the repair, remodeling or replacement of covered property should not be subject to depreciation.
Insurers are reminded that the justification for adjusting a claim must be in the claims register. Title 8 VSA § 3568 requires each insurer to maintain its business records in accordance with the rules adopted under this section. In addition, Rule 99-1, Section 4(A)(3) specifically requires that all claim records be maintained to clearly show the initiation, handling, and disposition of each claim. The claim record must document the adjuster’s determination of the amount of any write-off related to the specific claim.
Property insurance adjusters should remember to check for bulletins on various state insurance departments that affect how claims should be adjusted.
The First Party Claims Conference was a huge success and sold out with many late arrivals. The conference will return to the Encore Boston Harbor Resort next year from December 4-6, 2023. This new location made after-hours networking much more fun and, for most gamers, much more expensive.
If you have questions about replacement costs and actual cash values, be sure to follow up with Ed Eshoo.
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