Arkansas Insurance Department Cautions on Depreciation of Labor in Actual Cash Value Insurance Claims for Structural Loss
Jul 11, 2013
In Bulletin 13-2013 issued July 5, 2013, the Arkansas Insurance Department (“AID”) seeks to clarify its position on the depreciation of labor in relation to what items are eligible for depreciation in an actual cash value insurance claim for structural loss.
Depreciation, the AID explains, must be considered on a case-by-case basis, with the most important guiding principle being that its calculation must be actual–not artificial. The AID considers depreciation to be inherently artificial, but deems it to be improper if it is based on a calculation formula set in advance.
The AID also cautions insurers that estimates for labor of any kind related to replacement cannot be depreciated. Further, it considers artificial or excessive depreciation to be a violation of fair claims settlement practices.
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