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John Johnson
Posted on Monday, May 21, 2001 - 5:26 am:   

The insurance policy is, as have other writers before this submission pointed out, a contract. In most jurisdictions the statutory or case law does not favor penalties in or outside the printed
contract. Its "ok" to have contracted for such matters as "liquidated" damages or for an insurance contract to provide for the payment of ACV until actual replacement is completed; actually, the payment of ACV is what the policy contracts to do and, then, pay the RC if replacement is done. Since Mr. Stovall placed quotation marks around the word "punishment" it appears not only that the company storm supervisor is ignorant of the very thing he purports to supervise but of the law of contracts as well. The storm supervisor wanting to "punish" the Insured has opened his employer up to issues of "bad faith". Moreover, any IA who stayed with this insurer and bought into the "punishment" concept should review their own E&O policy. Those IA's who walked away from this assignment, or who would walk away from the assignment, are the smart ones.
Jay Leierer
Posted on Saturday, May 19, 2001 - 12:29 am:   

From an Oklahoma adjuster.Companies in Okla.handle deprc. in three ways.Tear off is never depreciated.Replacement is paid full price up front(not that often),replacement is depreciated as a unit(material and labor),or replacement is broken down as to material and labor with only the material part depreciated(This is considered to be the safest route to take to stay out of court)
Charles Crane
Posted on Wednesday, May 16, 2001 - 7:54 am:   

The Texas Homeowners Form B defines, on page 6 section 4: Loss Settlement (b) "We will pay only the actual cash value of the damaged building structure(s) until repair or replacement is completed. Repair or replacement must be completed within 365 days after a loss unless you request in writing that this time limit be extended for an additional 180 days." The damaged item had a normal useful life expectancy which depreciates through use or normal wear and tear. Usually, the item's age is calculated and withheld until the item is repaired or replaced. The Insured can understand this policy language with a good upfront conversation in the initial scope. Finally, tearoff is a labor function; labor should never be depreciated or withheld. Many states such as Oklahoma have caselaw that has ruled against such practices, laying the groundwork for Bad Faith with a disgorgement level penalty.
Insureds only understand what they have experienced with a prior claim, heard from their friends, and/ or what the handling adjuster fully explains. A clear understanding makes for no misunderstanding.
Linda Asberry (Linda)
Posted on Tuesday, May 15, 2001 - 10:05 pm:   

Depreciation MUST NEVER be used as punishment. The RC benefits are part of the policy contract language and must be adherred to as such--never anything else. The length of time to apply for those benefits most often lies with the state insurance boards. It is usually 1 or 2 years depending on the specific state. Interesting, few policyholders really understand the RC benefit and many never apply for them even though they do the repairs. Some states are now requiring NO depreciation on some HO policies even though it is written in the policies.
J.P. Theriot (Jpt)
Posted on Tuesday, May 15, 2001 - 9:09 pm:   

Was discussing a question pertaining to the ACV vs RCV payment. More specifically, we were referring to policy form CP0010 (6/95).

Question: In the event that the company pays the insured ACV for the loss, how long does the insured's have to file a claim for the withheld depreciation?

Any takers, will pass my thoughts on this subject later. Would like to obtain other opinions first.
daven kreifeldt
Posted on Tuesday, May 15, 2001 - 3:09 pm:   

As far as I am concerned, there is only one real claims manual on how claims are to be settled and it is called an insurance policy. You point out the policy calls for an ACV settlement until the item is replaced/repaired. That can be computed perhaps as a reasonable percentage per year. For an insurance company to figure a humungous amount and even use the word "punishment" is insane. I did work for an independent in the midwest, not a major by any means, who parroted the client's wish to heavily depreciate all roofs (hail) and depreciate tearoff 100% no matter how old calling it "defered payment". I do not seem to find defered payment defined in the policy. As far as I was concerned that carrier was cheating its insureds and is open for litagation. How in the world do you tell an insured with a 6 month old roof 100% depreciation on tearoff? I refused to and walked. good ole dave
Posted on Tuesday, May 15, 2001 - 9:22 am:   

You do owe the ACV up front. Withholding full RCC is merely a part of the policy until the work is completed. It is not a form a punhisment.
Darryl Martin (Darrylm)
Posted on Tuesday, May 15, 2001 - 10:00 am:   

When you say they want you to withhold depreciation as a form of punishment what exactly do you mean? Are they telling you to take a depreciation that is out of line with the item's age, condition or life expectancy or are they just saying be sure to take the proper depreciation because they want to make sure the insured replaces the items before we give them their RCB.

If it is the former then there is definitely a problem and the insurer is leaving himself open for litigation. If it the latter then their wording may be faulty but the logic is what the policy calls for.

Does anyone else have any thoughts?
Bobby L. Stovall
Posted on Monday, May 14, 2001 - 11:51 pm:   

Something that has been bothering me for some time that I thought I would throw out for adjuster "debate" if you will. I have some companies that want me to with-hold depreciation as a form of "punishment" to make sure the insureds replace an item that probably does not need to be replaced, such as complete siding when only one side of the dwelling is damaged. You owe ACV until replacement is done , not just a "punishment" amount to make sure the work gets done. Any questions?

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