Alabama

Maybe. Depending on the policy’s definition of ACV, depreciation of labor may be allowed. ACV must be defined as physical deterioration, depreciation, and obsolescence. If the policy remains mute on the subject, then the insurer may not depreciate labor.

 

Alaska

There is no court case or regulation specifically discussing this point. The Alaska Department of Insurance's Director of Insurance, Lori Wing-Heier, issued Bulletin B 24-07. The bulletin states that on January 01, 2025, all new policies cannot include depreciation of labor in the definition of "actual cash value." Renewing policies, going forward after that date, must be reformed if they previously allowed for depreciation. 

 

Arizona

There is no court case or regulation specifically discussing this point.

 

Arkansas

Ark. Code Ann. § 23-88-106 allows the depreciation of labor starting August 1, 2017. The policy, however, must have specific pre-approved language in order for this to be effective. 

 

California

State regulation 10 C.C.R.§ 2695.9(f)(1) does not allow the depreciation of labor.

 

Colorado

Yes, labor may be depreciated by an insurer when determining ACV.

 

Connecticut

There is no court case or regulation specifically discussing this point.

 

Delaware

There is no court case or regulation specifically discussing this point.

 

District of Columbia

Unknown.

 

Florida

An insurer may depreciate labor costs.

 

Georgia

There is no court case or regulation specifically discussing this point.

 

Hawaii

There is no court case or regulation specifically discussing this point.

 

Idaho

There is no court case or regulation specifically discussing this point.

 

Illinois

Maybe. Illinois state law does not automatically allow insurers to depreciate labor. It’s best to seek advice of counsel.

 

Indiana

An insurer may depreciate labor.

 

Iowa

There is no court case or regulation specifically discussing this point.

 

Kansas

An insurer may depreciate labor.

 

Kentucky

Kentucky state courts have refused to answer the question regarding labor depreciation. Federal court stated labor should not be depreciated when ACV is not defined in the policy. It’s best to seek advice of counsel.

 

Louisiana

There is no court case or regulation specifically discussing this point.

 

Maine

There is no court case or regulation specifically discussing this point.

 

Maryland

There is no court case or regulation specifically discussing this point.

 

Massachusetts

There is no court case or regulation specifically discussing this point.

 

Michigan

There is no court case or regulation specifically discussing this point. But, Anita G. Fox, director, signed Bulletin 2024-18-INS which states that carriers, with policies issued or renewed on January 01, 2025 or later, must have a standalone endorsement "...specifically identifying the nontangible items subject to depreciation" if the carrier wishes to depreciate labor or other nontangible items. The endorsement must be optional coverage available for a reduced premium.

 

Minnesota

Minnesota appears to take depreciation of labor on a case-by-case basis. It’s best to seek advice of counsel.

 

Mississippi

Yes, with limitations. The Mississippi Insurance Department stated in Bulletin 2017-8 that there is no law in Mississippi prohibiting depreciation of labor, but if an insurer is going to do it, it should clearly state so in the policy. In a 2020 case, the Fifth Circuit Court of Appeals, reading Mississippi law, denied an insurer’s motion to dismiss because “actual cash value” was not defined in the policy. Both the insurer and the insured had reasonable interpretations of the term; therefore, the court sided with the insured.[1]

 

Missouri

An insurer may depreciate labor unless the policy strictly prohibits it.

 

Montana

Montana Code Ann. § 33-24-10 does not allow for depreciation of labor. The Montana Insurance Commissioner issued an Advisory Memorandum reinforcing the idea that labor may not be depreciated in property claims.

 

Nebraska

An insurer may depreciate labor because a Nebraska court found that ACV is depreciation of the entire item, and the insured would not be “underindemnified by receiving the depreciated amount of both materials and labor.” See Henn v. American Family Mut. Ins. Co., 894 N.W.2d 179 (Neb. 2017)

 

Nevada

There is no court case or regulation specifically discussing this point.

 

New Hampshire

There is no court case or regulation specifically discussing this point.

 

New Jersey

There is no court case or regulation specifically discussing this point.

 

New Mexico

There is no court case or regulation specifically discussing this point.

 

New York

There is no court case or regulation specifically discussing this point.

 

North Carolina

In a 2020 decision, a North Carolina court stated labor costs may be depreciated in determining ACV.

 

North Dakota

There is no court case or regulation specifically discussing this point.

 

Ohio

Maybe. In 2020, the Sixth Circuit Court of Appeals, in looking at Ohio law, found that an insurer cannot depreciate labor if the policy does not define depreciation. This is a more modern interpretation than the Ohio Department of Insurance which conducted a market survey in 2011 and found the depreciation of labor to be an “exception.”

 

Oklahoma

Yes, insurers may depreciate labor in the determination of ACV.

 

Oregon

There is no court case or regulation specifically discussing this point.

 

Pennsylvania

Yes, with exceptions. If there is a partial loss, absent language in the policy, the insurer may not depreciate labor. Contrarily, if the policy defines ACV as “the cost to repair or replace the damaged property less deduction for physical deterioration (depreciation) and obsolescence...” (London v. Insurance Placement Facility, 703 A.2d 45, 49-50 (Pa. Super. Ct. 1997)) and a RCV policy as one that provides actual cash value payment until repairs are completed, then depreciation of labor is permissible. One court found it acceptable to depreciate labor and tax if there is a “holdback” of the depreciation until repairs are complete See Papurello v. State Farm Fire & Cas. Co., No. 15-1005, 2015 U.S. Dist. LEXIS 154536 (W.D. Pa. Nov. 16, 2015). It’s best to seek advice of counsel.

 

Rhode Island

There is no court case or regulation specifically discussing this point.

 

South Carolina

As of May 12, 2021, the court found a carrier can depreciate the cost of labor when the estimated cost to repair or replace the property includes both materials and embedded labor components.

 

South Dakota

There is no court case or regulation specifically discussing this point.

 

Tennessee

The Tennessee Supreme Court stated insurers may not depreciate labor.

 

Texas

Maybe. A Texas court suggested that labor costs may be depreciated. In Tolar v. Allstate Texas Lloyd’s Co., 772 F. Supp. 2d 825, 831 (N.D. Tex. 2011), the court determined that “GCOP (General Contractor Overhead & Profit), sales tax, repair costs, and property value together represent the total replacement cost value, it follows naturally that GCOP, sales tax, repair costs, and property value ought to be depreciated together to reach the ACV payment.” There are other cases which state repair costs may not be depreciated for partial losses. It’s best to seek advice of counsel.

 

Utah

There is no court case or regulation specifically discussing this point.

 

Vermont

The department of insurance states that labor does not break down or lose value over time. Therefore, depreciation of labor is prohibited by “8 V.S.A. § 4724(9)(F) and

is an unfair claim settlement practice in violation of 8 V.S.A. § 4723 (the Vermont Insurance Trade Practices Act).” See Insurance Bulletin Number 184.

 

Virginia

There is no court case or regulation specifically discussing this point.

 

Washington

No. In a 2016 court opinion the court opined that policy language was ambiguous when the insured depreciated labor costs. The court said the policy defined ACV as “the amount it costs to repair or replace property with like kind and quality less depreciation for physical deterioration and obsolescence.” See Lains v. American Family Mut. Ins. Co., No. C14-1982-JCC, 2016 WL 4533075, at *2 (W.D. Wash. Feb. 2, 2016).

 

West Virginia

There is no court case or regulation specifically discussing this point.

 

Wisconsin

There is no court case or regulation specifically discussing this point.

 

Wyoming

There is no court case or regulation specifically discussing this point. However, Jeffery P. Rude, commissioner, states in the April 19, 2023 bulletin, the department's position is that "...labor may not be depreciated when adjusting a claim for damage to property."

 

 

 

 

 

[1] The court used the concept of contract of adhesion which was discussed in Chapter 1.