Cincinnati Insurance Company Depreciation of Labor in Payouts Class Action

Can an insurance company calculating a payout for property damage depreciate labor costs? This class action brings suit against the Cincinnati Insurance Company alleging that it should not have depreciated labor in its calculations of payouts for damage to insured properties.

The subject of this class action is property coverage for buildings. It does not involve coverage for personal possessions inside the property, such as clothing or furniture.

Cincinnati has its domicile in Ohio, but it sells property insurance policies in Arizona, California, Illinois, Kentucky, Missouri, Ohio, Tennessee, Texas, Vermont, Virginia, Washington, and Wisconsin, which are the states at issue in this case.

The plaintiff in this case, Belle Meade Owners Association, Inc., insured its property in Knoxville, Tennessee against damage with a policy from Cincinnati.

The structures on the property were damaged by a severe storm on or around August 30, 2021. Belle Meade notified Cincinnati, which determined that the loss was covered.

According to the complaint, Cincinnati’s first step in calculating its actual cash value (ACV) payments to insureds like Belle Meade involves estimating the cost to repair or replace the damage with new materials. This is the replacement cost value (RCV). After that, the complaint alleges, it subtracts estimated depreciation, to arrive at the replacement cost less depreciation (RCLD).

The complaint alleges that, when Cincinnati calculated the ACV owed to Belle Meade, it “withheld costs for the future labor required to repair or replace the Insured Property as depreciation, even though future labor does not ‘depreciate’ before it has even been incurred.”

According to the complaint, Cincinnati uses a software program called Xactimate. The complaint alleges that Xactimate allows Cincinnati to choose to depreciate materials only or materials and labor. The complaint claims that Cincinnati improperly chose to depreciate labor.

The complaint alleges that the laws in the states at issue in this case are more or less the same as applied to the issue in this case. The complaint alleges that these states do not permit the depreciation of labor. It alleges that this point has already been determined “by court decision, statute, or state administrative agency where the property insurer, itself, chooses to calculate ACV exclusively pursuant to the RCLD methodology.”

The class for this action is all Cincinnati policyholders (or their assignees) (1) who made a structural damage claim for property in the states at issue (2) for which Cincinnati accepted coverage, then chose to calculate the ACV exclusively with RCLD methodology, (3) which resulted in an ACV payment, during the class period, from which non-material depreciation was withheld from the policyholder, 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, for the maximum period allowed by law.

Article Type: Lawsuit
Topic: Insurance
Tags: Business Insurance, Depreciation of Labor Costs, Incomplete payment of benefits due, Insurance, Property Damage from Incident