The North Carolina Supreme Court in Accardi v. Hartford Underwriters Ins. Co., 373 N.C. 292, 838 S.E.2d 454 (2020), held that a property insurer was allowed to depreciate the cost of labor in calculating ACV under a policy. In this case, a storm caused damage to the roof of the insured’s home, siding, and garage. Under the homeowner’s policy, the insurer was obligated to initially pay ACV for the loss, and then once the property was repaired or replaced, the policy obligated the insurer to pay the RCV. The policy contained a separate endorsement limited to roof damage, which was silent on the issue of labor costs. The insurance company argued that its policy language nevertheless unambiguously allowed it to depreciate both the cost of materials and the cost of labor. The insured argued that the insurer was required to separately calculate the materials and labor costs of repairing or replacing the damaged property and depreciate only the material costs and not the labor costs.
The trial court held against the insured, reasoning that the policy allowed the insurer to depreciate both labor and materials. While the policy did not expressly authorize the insurer to depreciate labor costs, the trial court considered the policy’s failure to distinguish between depreciation of labor and materials to mean that the insurer could depreciate both. According to the trial court, it would make no sense to separate the costs of labor from that of physical materials when evaluating depreciation. The North Carolina Supreme Court affirmed. In so doing, the Supreme Court found that unless the insurance policy provides justification for differentiating between labor and materials costs, it would make no sense to do so absent that language.