Liberty Mutual Fire Insurance Manipulation of Xactimate Class Action

This class action, brought against Liberty Mutual Fire Insurance Company, concerns the calculation of actual cash value (ACV) for structural damage to buildings. The complaint alleges that, when figuring ACV payments for claims, Liberty Mutual subtracts depreciation from labor costs, when it should not.

The class for this action is all Liberty Mutual Fire Insurance Company policyholders

• Who made a structural damage claim for property located in Alabama, Arizona, Connecticut, Illinois, Kentucky, Maryland, Mississippi, Ohio, Tennessee, Texas, Utah, Vermont, Washington, and Wisconsin; and
• For which Liberty Mutual accepted coverage and then chose to calculate ACV through Xactimate software;
• Which resulted in an ACV payment, during the maximum limitations period allowed in the respective state, from which labor was withheld from the policyholder due to the “manipulation of Xactimate software” as described in the complaint.

The complaint is careful to say that it is about ACV coverage for buildings and structures and not replacement cost value (RCV) coverage. The complaint makes a distinction between the two: “ACV payments are to be made prospectively, that is, prior to the policyholder undertaking repairs to damaged buildings and structure. On the other hand, RCV payments are made retrospectively, after repairs have been completed.”

When calculating ACV using the replacement cost less deprecation (RCLD) method for buildings and structures, the complaint alleges, Liberty Mutual “estimates the full amount of labor and new materials required to repair or replace the property, then subtracts depreciation for physical deterioration.” The complaint alleges that courts have held that, when an insurance company uses the RCLD method, insurance companies should not withhold amounts for depreciation of labor from ACV payments, unless the policy forms expressly allow this.

The complaint alleges that Liberty Mutual used Xactimate software to make its RCLD calculations. According to the complaint, “Xactimate can be manipulated to withhold labor from ACV payments by simply checking or unchecking certain boxes from depreciation.”

The complaint reviews some of these, including choices offered by Xactimate to depreciate removal labor costs or overhead and profit. Another category of items relates to additional labor costs relating to damage to high roofs or roofs with a steep pitch.

“Oftentimes,” the complaint alleges, Liberty Mutual “will remove the line-item surreptitiously, i.e., without notifying the policyholder. Other times, [Liberty Mutual] will affirmatively disclose to the policyholders in the Xactimate estimate that [Liberty Mutual] is withholding this labor under the auspice of ‘paid when incurred.’”

According to the complaint, the plaintiff in this case had some amount of labor costs withheld from her ACV payment by manipulation of the Xactimate calculations.

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