Erie Insurance Depreciation of Labor on Claims Ohio Class Action

Materials used to build structures deteriorate over time. So when insurance companies assess the actual cash value (ACV) of a damaged property, they subtract depreciation according to the structure’s age. However, the complaint for this class action alleges that, while it’s fine to depreciate the materials, labor should not be depreciated. It claims that Erie Insurance Company has paid out less than it should to its insureds because it depreciates the labor required to build the structure.

Plaintiffs Timothy and Carol Stevener insured their home in Sagemore Hills, Ohio with Erie Insurance Company. When their home was damaged in June 2019, it required some replacement or repair. Erie confirmed that the loss was a covered loss and that it was obliged to make a payout to them.

The policy the Steveners’ had with Erie, the complaint says, “provides replacement cost value (‘RCV’) coverage for both total loss of and partial loss to covered dwellings and other structures and, in some cases, ACV coverage for certain structural components.”

An adjuster came out to look at the damage. The loss was valued at $9,212.04. The complaint says that this amount “covered the cost of materials and labor required to complete the repairs.” A copy of the estimate sent to the Steveners was attached to the original complaint as Exhibit A when it was filed.

Erie subtracted $1,000 for the deductible under the policy. Then, the complaint says, it subtracted “an additional $971.08 for depreciation on coverage dwelling plus $6,069.96 for depreciation of the roof and siding.” The net payment was calculated to be $1,173.

According to the complaint, “The estimate upon which Erie’s ACV payment for the Insured Property was based indicates that Erie depreciated both material costs and labor costs associated with repairs to the house.”

The complaint quotes Black’s Law Dictionary as defining depreciation as “decline in an asset’s value because of use, wear, obsolescence, or age.” Materials do decline in this way, but the complaint argues that labor “is not susceptible to aging or wear” and should not be depreciated.

The complaint claims, “The Ohio Department of Insurance and the Sixth Circuit have both determined that it is inappropriate and contrary to industry practice to depreciate labor costs when determining the ACV of structural damage claims.”

The class for this action is all Erie policyholders under any property policies issued by Erie who made (1) a structural damage claim for property located in Ohio, (2) which resulted in an ACV payment 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 applicable deductible. The class period is the maximum time period allowed by applicable law.

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