Taxes and Associated Fees In Acquiring A Replacement Vehicle Are Not Required To Be Calculated As The Automobile’s ACV When Dealing With A Physical Damage Claim

The 6^th Circuit Court of Appeals recently held in Wilkerson v. American Family Insurance Co., 997 F.3d 666 (6^th Cir. 2021) that ACV meant market value in a standard automobile policy and that market value did not include the taxes and fees that the insured needed to pay for a replacement vehicle.  The 6^th Circuit sided with the insurer’s interpretation of its policy.  The policy “limits of liability” section limited the insurance company’s liability to the lesser of (1) the actual cash value of the property; or (2) the amount necessary to repair or replace the property.  To interpret “actual cash value” to mean replacement costs minus depreciation would render the two limit of liability clauses incoherent, according to the Court.  In reading the policy as a whole, the Court found that the phrase “actual cash value” was clear and unambiguous and only referred to the market value of the damaged vehicle.  As such, the concept of actual cash value necessarily excluded the taxes and fees that the vehicle owner sought to recover, which were incurred in purchasing a replacement vehicle.  One judge dissented, however.  The dissenting judge would have found ambiguity because the term “actual cash value” was not defined in the policy and the dissenting judge noted that Ohio courts have applied two different meanings to the term.