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This seems like babble to me. I have not learned one thing.

Xactimate is a small residential loss estimating system as is MSB/Integra, PowerClaim and Simsol. No harm no foul if you know that you are writing an estimate and expect that there will be supplements.As Xactimate certifies users, just not being certified will cause a problem if the Claim goes to court. On large commercial losses I often hire a competent local contractor, develop a scope and pay for a bid (not an estimate) to be written. Usually when I do this I also hire an engineer to write a report and an Architect to develop Replacement Cost (RCV). Most of the time these losses are in formal appraisal. All of these people serve as consultants and are qualified to testify.

Ok Ray, here's the short version as to what I have taken from this informative (for me anyway) exchange:

1) If one is working a large claim in CA, because of their legislation, you hire a real estate appraiser to complete your estimate.
2) The appraiser estimates fair market value of the residence (which is typically based on sales throughout the market and not cost directly), and the appraiser also estimates fair market value of the land. The adjuster deducts the land value from the fair market value of the property to figure out kind of a modified ACV. There is no physical depreciation ACV calculation payment in CA under this scenario. Their ACV is just the net of the FMV of the residence less the FMV of the land.
3) Your estimate is done.
4) But the insured who does not have an RCV policy could come up very short in a number of cases when compared to a traditional ACV age:life physical depreciation policy. That's not really our problem, but I'm sure there are unintended consequences when XXXX hits the fan in these cases. Leland probably knows the nuances of this legislation pretty well. I'd guess if there is a big earthquake, we'll probably get to know it alot more, but that may be a whole different can of worms. Chuck- thanks. I'm trying to fill in the gaps, and that makes alot of sense. I'll get the Xmate certifications based on your post.

OK, I would like to throw my .02 into this discussion......Florida.......much easier to pay policy limits on a covered loss without going crazy due to our VPL........basically, if the risk: 1) looses it's identity as what it was, then pay policy limits...2) if the risk is ordered to be demoed by a public official (and the reason is a loss covered by the HO policy) pay the policy limits.
The VPL does allow the company to take into consideration the ability to adjust the amount of loss according to the policy language if the amount of insurance carried does not meet the RCV requirements......and also if the policy was originally written on an ACV basis, such as an HO-1 ISO without an RCV endorsepent......

In a case where the risk will obviously qualify for payment per the VPL, we do not write a stick built estimate as a rule....sometimes we will us the xacttotal valuation and then save as an estimate, but mostly we will either handle as a SF or just pay the policy limits....I mean if you have a stucco re- clad CBS, and you can stand in the front yard and see the swimming pool in the back yard with the remains of the enclosure looking like a pretzel and two of the four elevations have major spalding, the Company is going to pay on the VPL so why make the adjuster's crazy?

well, that's my story and I'm sticking to it!!

Mr. Jortberg, let me fine tune some of your terminology: The appraiser does not do an estimate- the appraiser does an appraisal of the structure. The only reason the appraiser looks at the land value is to help him arrive at the structure value. Also- the adjuster will still need to do an estimate, in most cases. Usually the FMV will be less than the repair estimate but not always, the carrier needs to see both numbers. Imagine if the appraisal is $200,000 and the repair is $210,000. The carrier pays $200,000 on a policy with a $300,000 limit. Three weeks later, after the insured submits their own appraisal for $220,000, the carrier agrees that $220,000 is a more accurate value of the structure. The debris has already been cleaned up, the carrier will pay the $210,000 and they're glad they have a complete estimate in their file.

And FMV = ACV is not legislation- its Calif case law- a previous court case that establishes a "precedent" that judges will follow on future cases. Think of it like this- a legislature, like a congress, senate,or city council can pass a law saying that all houses must be painted in "earth tone" colors. Eventually someone will try to paint their house medium green, the city code enforcement will say no, and then there will be a court case and the judge will have to decide if "medium green" is an "earth tone". That decision will become case law. Unfortunately that case will not decide whether "brownish red" is an "earth tone" but maybe you could read the case and follow the judges reasoning to arrive at your own conclusion. If somebody tried to paint their house "brownish red" AND got into a dispute with the government AND it went to court you could end up with two court cases that determine what an "earth tone" color is, but the second case would probably take some of the reasoning from the first one. The "law" that FMV = ACV for ACV losses is case law in Calif, not a statute. And it would apply to partial losses but the policies are written so that it doesn't. The case law or statute in each state usually determines the definition of "like kind quality", "good faith", "depreciation" etc. If the State legislature wrote the insurance law back in 1880 with no recent changes, that particular state could have a hodge podge of court cases that are the "law". When your supervisor tells you to handle a claim a certain way it is often due the case law in your state even if the supervisor themselves is not aware of which court case. One reason insurance carriers are reluctant to modernize the language in the policies is because there are so many old cases that are based on the old language, and writing the policy in modern English would put the carrier in uncharted waters because the meanings of the words would have to get tested all over again in court everytime there was a disagreement on a claim. This is important for adjusters to understand because the way you do your job depends on the case law, not just the policy itself, and if you have an identical policy in another state the way you handle it might be different. Also be careful trying to play lawyer, because although it is important to understand what case law is and how it affects your job, there can be so many cases only a lawyer will be able to tell you which ones really apply to any given situation. The lawyers will usually tell you this in their newsletters that they mail to the bosses of the adjusting companies and carriers. An example of recent California case law is that if a bank makes a "full credit bid" on a foreclosed property they will usually have no right to collect any insurance claim money. Similar cases have occurred in other states like Missouri, if it hasn't happened in your state you could still deny a claim under a similar set of facts, you just wouldn't be able to point to any case law in your own state.

The case law you refer to at the end of your post, Leland, is one of the most bizarre applications of law I have seen recently and only goes to show that banks may have even less sympathy in court than insurance companies.

Posted By RJortberg on 17 May 2009 11:21 PM
Ok Ray, here's the short version as to what I have taken from this informative (for me anyway) exchange:

1) If one is working a large claim in CA, because of their legislation, you hire a real estate appraiser to complete your estimate. 

Lst time I worked in California(1996) my storm manager called me and ask me to find the building over water exclusion for windstorm  in the Allstate  Delux Policy. Bet this will throw some and make you pull out your hair ?

My hair keeps trying to fall out all by itself, Ray. No need to pull. I have only worked about four or five Allstate claims ever (How did that happen?), so what exactly does the Allstate Deluxe Policy say about buildings over water? Although I don't have a copy handy, I believe the NFIP policy excludes buildings over water.