West Bend Mutual Improper Depreciation of Labor Class Action

When an insurance company calculates a payout for property damage, what part of the replacement value gets depreciated? The complaint for this class action alleges that West Bend Mutual Insurance Company improperly depreciates the cost of labor for replacing or restoring the property, even though labor does not depreciate.

West Bend offers property coverages for homes and businesses in Illinois, Kentucky, Missouri, Ohio, Tennessee, Virginia, and Wisconsin. The complaint alleges that the laws in these states are nearly identical as they pertain to the matters in this case. This class action covers coverage for buildings and structures only—not for their contents—and only in cases where West Bend itself chose to calculate the actual cash value (ACV) exclusively according to the replacement cost less depreciation methodology.

The plaintiff in this case, No Joke, Inc., has property in Loves Park, Illinois that it insured with West Bend. On or around April 7, 2020, the complaint says, the property was damaged and required replacement or repair.

When West Bend calculates its ACV payments for its policyholders, the complaint alleges, it first estimates the amount needed to repair or replace the damage with new materials. This is the replacement cost value (RCV), from which West Bend subtracts the estimated depreciation.

According to the complaint, West Bend uses a computer program called Xactimate to estimate RCV and depreciation, as well as ACV. The complaint alleges, “West Bend’s adjuster determined that No Joke had suffered a covered loss in the amount of $49,041.78 (the RCV) to its property.” To calculate the ACV payable to No Joke, the complaint claims, “West Bend subtracted from the RCV estimate the deductible plus an additional amount of $6,113.89 for depreciation.”

But the complaint alleges that No Joke was underpaid because, it says, West Bend withheld depreciation on both the costs of materials and labor to repair or replace No Joke’s property. The complaint alleges that West Bend should not have withheld depreciation and further claims that the Xactimate software allows a choice as to whether to depreciate materials and labor or materials only.

The class for this action is all West Bend policyholders (1) who made a structural damage claim for property located in Illinois, Kentucky, Missouri, Ohio, Tennessee, Virginia, or Wisconsin, (2) for which West Bend accepted coverage and then chose to calculate actual cash value exclusively pursuant to the replacement cost less depreciation methodology and not any other methodology, such as fair market value, (3) which resulted in an actual cash value payment during the class period from which non-material depreciation was withheld from the policyholder; or which should have resulted in an actual cash value payment but for the withholding of non-material depreciation causing the loss to drop below the applicable deductible, for the maximum limitations period as may be allowed by law.

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