Property Damage: When is Recovering ACV (depreciated value) the Only Option?

By | December 23, 2014

Excerpt from ia Magazine –

Author Bill Wilson |

An agent’s insured has multiple rental properties. During a recent inspection, the insured found hail damage to a roof and reported the claim to his agent, but was not sure of the date the hail caused the damage.

Q: “The adjuster claims the last hail storm was more than 180 day ago and will only pay actual cash value (ACV), citing this CP 00 10 provision:

‘You may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis. In the event you elect to have loss or damage settled on an actual cash value basis, you may still make a claim for the additional coverage this Optional Coverage provides if you notify us of your intent to do so within 180 days after the loss or damage.’

We have never seen this interpretation. What do you think?”

A: “We ran this by the Big ‘I’ Virtual University (VU) faculty and the unanimous response was we do not believe this was the intent of this provision, nor do we read it the same way as the adjuster.

This condition says, ‘In the event you elect to have loss or damage settled on an actual cash value basis…’ (emphasis ours). Unless the insured is electing to settle initially on an ACV basis (he’s not), the rest of the sentence (‘…you may still make a claim for the additional coverage this Optional Coverage provides if you notify us of your intent to do so within 180 days after the loss or damage’) doesn’t apply, because it’s conditional on the insured requesting ACV.

In one Tennessee legal case, a policy gave the insured a year to sue the insurer from the date of loss. The insurer did not deny the claim for more than 11 months. When they finally denied most of the claim, the insured was unable to get an attorney and file suit within a year of the date of loss. The court ruled the one-year period should begin to toll from the denial, not the date of loss. That has been the rule of law in Tennessee ever since.

[Bold emphasis added]  To be fair to all parties, we believe ISO should change the language so the 180 days begins when the damage is discovered in the case of situations like this, or when covered hidden water damage from a leaking pipe becomes apparent. Our national Technical Affairs Committee will consider bringing this issue to ISO.”

Bill Wilson is director of the Big “I” Virtual University.