Selective Insurance Co. of SC Depreciation of Labor Tennessee Class Action

When an insured party makes a claim for the actual cash value (ACV) of damaged property, how is that amount calculated? The complaint for this class action alleges that, in figuring the ACV of damaged property, Selective Insurance Company of South Carolina should not have subtracted depreciation for labor.

A person named Victor Reed insured his home in Smyrna, Tennessee against damage with Selective. In July 2019, the property suffered damage from wind. Selective determined that the loss was covered by the policy. On September 12, 2019, Reed assigned his insurance claim to the plaintiff in this case, Helping Hands Home Improvement, LLC.

Selective chose a “replacement cost less depreciation” method of calculating how much it would pay for the damages. The complaint says Selective used Xactimate, a commercial software program, to make the calculation of replacement cost value (RCV), depreciation, and ACV. It used the software to arrive at an RCV of just over S7,000, then used the software again to calculate depreciation at a little over $2,300. 

Helping Hands claims this figure results in an underpayment of the claim. According to the complaint, “the specific commercial claims estimating software used by Selective allows for depreciation of materials only or the depreciation of both material and labor in its depreciation setting preferences.”

The complaint says, “While an insurer may lawfully depreciate material costs when calculating the amount of an ACV payment owed to an insured, it may not lawfully withhold repair labor as depreciation under Selective’s policy forms at issue in Tennessee.” Unfortunately, according to the complaint, the written estimate Selective provided does not specifically show the amount calculated for labor or for its depreciation. 

The complaint proposes several points regarding the class.

• The class for this action is all Selective policyholders (and their assignees) 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 where no payment was made because the withholding of non-material depreciation caused the amount to fall below the deductible.
• The class period is the maximum time period allowed by law.
• “Non-material” depreciation in this context means the use of the “depreciate removal,” “depreciate non-material,” or “depreciate O&P” option setting in the Xactimate software.
• The class does not include any claims made under policies that expressly permit the depreciation of labor or which exhaust the limits of the insurance.

Article Type: Lawsuit
Topic: Insurance
Tags: Actual Cash Value, Insurance, Property Damage from Incident, depreciation