The ability of an insurance carrier to depreciate labor costs when determining Actual Cash Value (“ACV”) varies from state to state, with a number of states yet to weigh in.
On September 23, 2021, the Supreme Court of Illinois provided definitive guidance in Sproull v. State Farm Fire & Cas. Co., affirming the appellate court, and concluding:
Where Illinois’s insurance regulations provide that ‘actual cash value’ of an insured, damaged structure is determined as ‘replacement cost of property at time of loss less depreciation, if any,’ and the policy does not itself define actual cash value, only the property structure and materials are subject to a reasonable deduction for depreciation, and depreciation may not be applied to the intangible labor component.
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