While replacement cost policies provide coverage for the full cost to replace a covered loss, actual cash value policies, which typically cost significantly less, provide coverage for the value of the property at the time of loss, which is calculated as replacement cost less depreciation.
In some cases, regulators and courts have taken the position that depreciation should not include the cost of the labor expenses but only the cost of materials.
NAMIC believes that insurers should be able to able to provide actual cash value coverage that includes depreciation of labor costs. Ensuring that coverage is provided based on reasonably anticipated costs allows insurers to provide consumers with lower cost options when buying insurance.
NAMIC has supported the position that the cost of labor may be depreciated in calculating actual cash value in a number of amicus curiae briefs and has supported legislation responsive to contrary holdings by courts and regulators.
October 13, 2017 The Tennessee Department of Commerce and Insurance recently circulated a draft bulletin that outlines its expectations of property/casualty insurers regarding the depreciation of labor... Read more
October 12, 2017 NAMIC represented members at a Virginia Bureau of Insurance meeting on Oct. 11 to discuss the future of the commercial auto filing process... Read more
February 27, 2017 The Arkansas Legislature on Feb. 24 passed SB 133, which allows property insurers to take expense depreciation on... Read more
February 20, 2017 The Nebraska Supreme Court has ruled that an insurer may depreciate the cost of labor in determining “actual cash value,” in agreement with an... Read more
January 25, 2017 NAMIC provided written testimony on SB 133 which would permit property insurers to depreciate a wide array of expenses in calculating losses covered by actual cash value policies. In 2013, the Arkansas Supreme Court found... Read more