Actual Cash Value Depreciation Deduction and the Broad Evidence Rule



...if it hasn’t been painted in several years, probably would. My position is that the component items in a loss should be looked at separately. For some, a deduction for betterment is proper; for others it’s not.

For property that isn’t going to be repaired, I’d go for a market-value standard: would the lack of the repairs reduce the market value of the property? If so, that’s the measure of the loss. If not, the insured hasn’t sustained any loss and shouldn’t receive indemnification until the repairs are done.

A similar version of this article will appear in the Spring 2012 issue of the CPCU Society’s Risk Management Interest Group newsletter, Claims Quorum. A comparable version of this story was previously published in Insurance Advocate. It is copyrighted by the CPCU Society and republished here with their permission.

“My guess is that, despite the court decisions, replacement cost less depreciation will continue to be the way insurers want to settle losses. Insureds will have to resort to the courts to recover more than replacement cost less depreciation for ACV losses.”