Society Insurance Improper Depreciation of Labor IL, TN, WI Class Action

When an insurance company calculates a payout for damage to an insured property, the calculation can be made in different ways. This class action takes issue with the calculations of Society Insurance, A Mutual Company, alleging that, in determining the actual cash value (ACV) of a loss, it improperly depreciates labor costs.

Society insures homes and commercial properties in a number of states, including Illinois, Tennessee, and Wisconsin. The complaint alleges that the property insurance forms in these three states are “materially identical” for the issues in this case.

Society insured a restaurant property in Illinois that is owned by the plaintiff in this case, Solly Ringo’s, LLC. On or around April 7, 2020, the property suffered damage, which Society found to be covered by the policy, and which required repair or replacement.

In such a situation, the complaint says, after an adjuster reviews the damage, Society estimates the replacement cost value (RCV) or the amount it would cost to repair or replace the damage with new materials; then, it subtracts the deductible and depreciation, to arrive at the payout price. The complaint alleges that Society uses a software program called Symbility to make its calculations.

A May 5, 2020 Society estimate said that the adjuster had found the restaurant had suffered a covered loss with an RCV of $7,291.31. This amount included the cost of both materials and labor. Society subtracted from this the policy’s $1,000 deductible, then subtracted $1,662.72 as depreciation. This left an ACV payout of $4,628.59, which the complaint alleges is an underpayment.

When it made its calculations, the complaint alleges, Society subtracted amounts for depreciation from both the material and the labor costs, “even though future labor does not depreciate in value over time.” The complaint asserts, “The Policy does not permit the withholding of future labor as depreciation[.]”

The complaint alleges that the Symbility software can make its calculations in two different ways: subtracting depreciation for materials only, or subtracting depreciation from both materials and labor. According to the complaint, in this case, Society chose the wrong mode and withheld costs for the depreciation of labor. This, the complaint claims, means that Society underpaid Solly Ringo’s for its claim.

The class for this action is all Society policyholders (or their lawful assignees) who made (1) a structural damage claim for property located in Illinois, Tennessee, or Wisconsin, (2) for which Society accepted coverage, then calculated ACV only via the replacement cost less depreciation method, and not any other method such as fair market value, (3) which resulted in an ACV payment during the maximum limitations period allowed by law, from which non-material depreciation was withheld from the policyholder, or which should have resulted in an ACV payment but where the withholding of non-material depreciation caused the loss to drop below the applicable deductible.

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