Allstate Depreciated Labor Costs in Figuring Claims Class Action

When a tree fell on Donald Brasher’s home in a wind- and hailstorm in November 2014, it damaged his roof, fence, and bathroom. Brasher had an insurance policy with Allstate Indemnity Company, but according to the complaint for this class action, the company depreciated labor costs on the property, lowering costs so that they were just below the deductible.

The class for this action is all Allstate Indemnity Company property insurance policy holders who submitted a claim for property damage in the state of Alabama and whose actual cash value (ACV) payment was reduced by labor depreciation or whose claim was denied after labor depreciation, between April 4, 2012 and the date of trial of this case. Excluded from the class are policy holders who received payment to the full limits of their coverage and policy holders whose claims are the subject of an appraisal or individual lawsuit.

Brasher’s policy covers damage from such storms, but the policy contains the following line: “Loss to property insured by this policy … will be settled on an actual cash value basis. This means there may be a deduction for depreciation.” But the complaint points out that neither actual cash value nor depreciation is defined in the policy.

According to the complaint, depreciation is normally a property’s reduction in value over time due to the passage of time or wear and tear, but it is not ordinarily applied to labor costs.

Although no specific line items termed “labor costs” were included in the Allstate statement, the complaint points out that two of the six items—Content Manipulation and General Demotion, which primarily involve labor—were not depreciated. Also, sales tax was applied to the other categories, and the complaint claims that if they did not include labor, the charge for sales tax should have been higher. 

Brasher’s deductible for damage was $2,500. The replacement cost was just over $5,000, but after depreciation, the ACV came to $2,446.07—just below the deductible, enabling the company to reject the claim.

A few days after the storm, Brasher spent $1,800 to have temporary repairs made to his roof and bathroom and also bought a tarp to cover his damaged roof.

Unfortunately, in March 2016, another storm again damaged the roof, this time over Brasher’s bedroom, bathroom, and kitchen, and also damaged his porch landing. The roof tarp blew loose, which let water into the house.

This time, Allstate refused to pay for the damage repair because the damage from the previous storm had never been properly repaired.

The complaint claims the company has breached its contract with Brasher. Also, Alabama law specifies that payments of money accrue interest from the date the money should have been paid, so the complaint claims that Allstate should pay both the claims and interest on the amounts. 

Article Type: Lawsuit
Topic: Consumer
Tags: Deceptive Insurance Practices, Depreciation of Labor Costs, Incomplete payment of benefits due