For the third part in this series on the Alabama Act, I want to focus on the scope of repairs and how the real cash value is determined. The Alabama Administrative Code provides guidance to policyholders on how to calculate property insurance claims.
Ala. Administration. Encode. R. 482-1-125-.09 provides:
(1) When the policy provides for the adjustment and adjustment of first-party losses based on the cost of compensation, and a loss requires repair or replacement of an item or part, all the following physical damages which necessarily or reasonably incurred to make such repair or replacement that is not otherwise excluded by the insurance shall be included in the loss. The insured shall not have to pay for improvement or other costs in addition to the applicable deductible, with the exception of what is prescribed in the insurance. in the event of a house fire and increased coverage, the insurer shall determine the actual cash value as compensation cost for property at the time of loss minus depreciation. At the insured's request, the insurer shall provide a copy of the spreadsheet with requirements for all deductions for depreciation.
(3) In cases where the insured's interest is limited because the property has a nominal or no economic value, or a value that is disproportionate to the cost of compensation less depreciation, no determination of the actual cash value under paragraph 2 is required. In such cases, the insurer shall, at the request of the insured, provide a written explanation of the basis for limiting the recovery amount together with the amount to be paid under the insurance.
For a discussion of the depreciation of labor [1
In Part 4 of this blog series, I will discuss Alabama's policies for insurance payments.