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Arkansas Bars Depreciation of Labor When Calculating Actual Cash Value

Over the last few years, courts have disagreed over whether labor — as opposed to materials — can be depreciated when determining actual cash value (ACV); two of our 2015 posts addressed cases in which the District of Kansas said yes while a Kentucky federal court said no.  On Thursday of last week, in a split decision, Arkansas’s highest court sided with the naysayers in Shelter Mut. Ins. Co. v. Goodner, 2015 Ark. 460, 2015 WL 8482788 (Ark., Dec. 10, 2015).  Two of the justices filed a vigorous descent.  At the present time, the case has no LEXIS citation. The insureds owned a mobile home in Texarkana that sustained a covered loss in July of 2012.  The policy provided that

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Posted in Actual Cash Value, Depreciation, Homeowners Coverage

Arkansas’ Supreme Court Prohibits The Depreciation Of Labor Costs Under An Actual Cash Value Policy

On November 21, 2013, Arkansas’ highest court held that “the costs of labor may not be depreciated when determining the actual cash value of a covered loss under an indemnity insurance policy that does not define the term ‘actual cash value.’”  In addition, the court bottomed its decision on both  the old canard of ambiguity and on the notion that depreciating labor is both illogical and inconsistent with the principle of indemnity.  As a result, even a change in policy language to expressly provide for labor’s depreciation might not pass muster in the state. Adams v. Cameron Mutual Ins. Co., 2013 Ark. 475 (Ark., Nov. 21, 2013) arose after a tornado damaged the Adamses’ home in Mena, Arkansas.  Their homeowners

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Posted in Actual Cash Value, Ambiguity, Depreciation, Tornado
About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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