Catlin Specialty Insurance Company Labor Depreciation Tennessee Class Action

When your insurance company pays for the repair or replacement needed for a damaged structure, how do they calculate the actual cash value (ACV) and your payout? The complaint for this class action alleges that Catlin Specialty Insurance Company deducts depreciation for labor, and claims that the company should not be permitted to do that.

The class for this action is all Catlin policyholders who made (1) a structural damage claim for property located in Tennessee (2) which resulted in an ACV payment during the class period from which non-material depreciation was withheld, or which should have resulted in an ACV payment but for the withholding of non-material depreciation causing the loss to drop below the deductible.

The case concerns residential properties owned by Somo Enterprises, a small company in Tennessee. The company owned thirty-six homes, all insured by Catlin.

On or about December 27, 2018, the complaint says, twenty-eight of the homes suffered “direct physical loss” caused by wind.

Somo made a claim to Catlin, and Catlin determined that the losses were covered.

The complaint alleges, “Catlin calculated its actual cash value (“ACV”) payment obligation to Somo by first estimating the cost to repair or replace the damage with new materials (replacement cost value, or “RCV”), then subtracted depreciation.” However, the complaint says this was an incorrect calculation, because “[t]he Policy, and the other property forms at issue in this pleading, do not permit the withholding or deduction of labor as depreciation…”

The depreciation calculation makes a substantial difference. Catlin’s original RCV for the Somo properties came out at just over $163,144. However, after subtracting depreciation, the amount left over was only a little over $38,201. The complaint alleges that Catlin subtracted depreciation of both materials and labor, “even though labor does not depreciate in value over time.”

The complaint alleges that Tennessee does not allow depreciation of labor, based on two answers given by the Tennessee Department of Insurance (TDOI) to survey questions from the National Association of Insurance Commissioners.

The first question asked, “Does your state allow the depreciation of labor under an actual cash value (ACV) loss settlement provision for property?” TDOI’s answer was, “It is generally the belief that labor is not depreciable, but the Department has no written position on the matter. We believe there is some case law supporting this aspect. To our knowledge, this is not a problem here.”

The second question asked, “Is depreciation for labor allowed on an ACV roof if it is totally replaced?” The TDOI answered, “We do not believe insurers are depreciating labor unless their provision calls for it. At least one insurer has a policy provision addressing this issue.”

The complaint says that Catlin’s policies “neither addressed nor called for removal or repair labor to be withheld as depreciation.”

Article Type: Lawsuit
Topic: Insurance

Most Recent Case Event

Catlin Specialty Insurance Company Labor Depreciation Tennessee Complaint

March 10, 2020

When your insurance company pays for the repair or replacement needed for a damaged structure, how do they calculate the actual cash value (ACV) and your payout? The complaint for this class action alleges that Catlin Specialty Insurance Company deducts depreciation for labor, and claims that the company should not be permitted to do that.

Catlin Specialty Insurance Company Labor Depreciation Tennessee Complaint

Case Event History

Catlin Specialty Insurance Company Labor Depreciation Tennessee Complaint

March 10, 2020

When your insurance company pays for the repair or replacement needed for a damaged structure, how do they calculate the actual cash value (ACV) and your payout? The complaint for this class action alleges that Catlin Specialty Insurance Company deducts depreciation for labor, and claims that the company should not be permitted to do that.

Catlin Specialty Insurance Company Labor Depreciation Tennessee Complaint
Tags: Actual Cash Value, Depreciation of Labor Costs, Incomplete payment of benefits due, Insurance