Posted By Tim_Johnson on 18 May 2009 07:50 PM
Apply depreciation equal to the amount of sales tax, that's it. A 10 year old craftsman 1/2" ratchet is as good as a brand new one. If the insd. has RC coverage, give him the sales tax back when he replaces the tools. In these situations there is no reason to make it complicated.
On what grounds do you hold back sales tax until replaced?
Unless defined otherwise, ACV = RCV less depreciation. RCV should include sales tax. At least that is the claims practice for several large carriers I work for.
I know that when it comes down to smaller carriers and the judgment of the field adjuster, it can be done differently. But if you are reporting to a very large carrier that has a Contents Inventory system where the items are entered to the paperless claim file, it will prompt you for a tax rate and add tax to each item individually on that list, so that specific item can be focused on when a replacement receipt is presented for that item (not a sloppy tax % added to the end of a long list of items).
You can override the tax to "zero" if you negotiate a value, or clean-repair, but if it is to be replaced, tax in the local district should be allowed as part of the RCV in my opinion. It's a lot of work to do that on a spreadsheet or handwritten forms, but it's done automatically with software designed for contents and I have worked with 2 different ones lately.
Xm8 has a contents module for example, that Allied-Nationwide uses. You don't get it with a standard Xm8 install, you have to pay for the contents module as a separate thing and only the larger carriers do that. The "import template" that us field guys provide to them is an Excel spreadsheet that is buried in the files of every Xm8 installation, you find it, fill it out, send it to the carrier and they import it into their system. Tax allowed on individual items before depreciation.
Posted By Leland ...Is "actual cash value" really replacement cost less depreciation? Is that really what the policy says?
Hi Leland, how ya been? In the state of CA where you and I spend most of our time, many of the policies I see DO DEFINE ACV in the policy, specifically to get around the "whacked" ruling that we live with in California. As Chuck mentioned, one of the possible definitions of ACV is Fair Market Value: a seller under no duress, buyer under no duress. It's awkward in some of the Craig's list - Garage sale type settings where someone may be selling an item like your damaged item, but they are blowing it out for a fast sale.
That California ruling (ACV = Fair Market Value unless specifically defined otherwise in the policy) made things very grueling for us for a while. But you will find most carriers licensed to do business in California have modified wording of the policy, or added an endorsement to clearly define ACV as RC less depreciation. The Washington state thing you quoted is different, and things are different in other states.
Some of the very large carriers already had ACV defined in their policy before that ruling and never had to deal with it. Commercial policies typically define ACV so there is no uncertainty. This is like the "mold is gold" craze, then carriers respond by wording the policy more specifically so people quit driving a truck through it.
I am currently deployed out of state, and can tell you that the carrier's homeowner policy DOES clearly say ACV = RC - Depreciation, and I'm dealing with a lot of contents and hard-hit structure claims right now.
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If I was dealing with your claim example, I would depreciate the items based on condition, and wear. I don't see tools like a crystal vase that does not depreciate. I would start with about a 50 year life for good tools, but if the guy had awesome tools that were well cared for, consider a more reasonable % rather than strictly the years. Like a couch in a house without kids, just explain it in the activity log and be fair with everyone so the claim stays closed