State Auto P&C Depreciation of Labor on MI, TN, KY, or OH Claims Class Action

State Auto Property and Casualty (P&C) Company offers personal and commercial lines of property insurance. According to the complaint for this class action, when calculating property loss or damage payouts, it depreciates non-material items, such as labor, something the complaint claims is improper.

The Cedar View Food Mart, located in Olive Branch Mississippi, was insured under a policy from State Auto. On or about January 10, 2020, Cedar View suffered a physical loss. The loss was covered under the policy and no exclusion in the policy applied.

Cedar View informed State Auto, which inspected the property and determined that the loss was covered.

To calculated the actual cash value (ACV) that it owed to Cedar View, State Auto first estimated the costs to repair or replace the damaged parts of the structure with new materials. This is the replacement cost value (RCV). This came to $17,851.32. After that, State Auto subtracted depreciation, in the amount of $3,006.48.

The complaint alleges that State Auto used a computer program called Xactimate for its calculations. The program allows for either the depreciation of both materials and labor or the depreciation of materials alone. In this context, “labor” refers to intangible non-materials, including labor costs, laborers’ equipment costs, and laborers’ overhead and profit. These costs include the costs of removing damaged property before repairing or rebuilding begins.

Because the final payout amount was calculated by the computer program, the complaint says that Cedar View is unable to determine exactly what amounts were depreciation of labor as opposed to depreciation of materials.

The complaint alleges that State Auto may depreciate material costs, but “it may not lawfully withhold repair labor as depreciation under State Auto P&C’s policy forms at issue in Mississippi, Tennessee, Kentucky, and Ohio. While this may be permissible under some policies, the complaint claims, those policies include a “labor depreciation permissive form” which Cedar View’s policy did not have.

The class for this action is all State Auto P&C policyholders who made (1) a structural damage claim on property in Mississippi, Tennessee, Kentucky, or Ohio, (2) for which an actual cash value payment was made, during the class period, from which non-material depreciation was withheld, or for which an actual cash value payment should have been made except for the withholding of non-material depreciation caused the payment amount to fall below the deductible, during the maximum allowable statute of limitations period.

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