Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Phone: 602-322-4038
Steven Plitt, Expert Witness

Steven Plitt, Expert Witness

Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

LABOR COSTS ARE NOT DEPRECIABLE WHEN CALCULATING ACTUAL CASH VALUE

by | Mar 24, 2022 | Insurance Law

The Illinois Supreme Court ruled in Sproull v. State Farm Fire and Casualty Co., ___ N.E.3d ___, 2021 Ill. 126446, 2021 WL 126446 (Ill. 9/23/21) affirming 172 N.E.3d 1186 (Ill. App. 5th Dist. 7/24/20), as an issue of first impression that homeowner insurance companies cannot depreciate labor costs in calculating ACV when the policy did not define ACV.  The Illinois Administrative Code indicated that ACV of a damaged structure was to be determined as “replacement cost of property at time of loss less depreciation, if any.”  See 50 Ill. Admin. Code §919.80(d)(8)(A).  However, neither the Code nor the insurance policy in question set forth a definition of “depreciation” or established a method for calculating it.  Because of this, the Illinois Supreme Court found that the policy was ambiguous on the question of labor depreciation because it could be subject to more than one reasonable interpretation.

This issue is going to be decided on a case-by-case basis.  In reaching its conclusion, the Illinois Supreme Court conducted a review of the law from jurisdictions that had adopted the view that labor can be depreciated from those that found that it could not.

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