By David J. Salmon, Esq.
David J. Salmon, Esq. Courtesy, Groelle and Salmon, P.A.
Florida law concerning actual cash value damages changed. But insurance professionals are not adapting. Adjusters on both sides of the fence define “actual cash value” as “replacement cost less depreciation”. Insurers employ this formula through software estimating programs, which do not account for variations in state law.
In Vazquez v. Citizens Prop. Ins. Corp., 304 So.3d 1280 (Fla. 3rd DCA 2020), the trial Court ruled the insured could not argue she was entitled to costs for matching continuous flooring and cabinets. The insurance company was only “initially required to pay the actual value of the property that sustained the direct physical loss.” The Court “limited the evidence to the actual cash value of the physical damage and excluded evidence of undamaged items.”
The appellate Court focused on “direct loss to property” and “physical loss”. Citing Homeowners Choice Prop. & Cas. v. Maspons, 211 So. 3d 1067, 1069 (Fla. 3d DCA 2017), the Court stated that “direct” and “physical” modify loss and impose the requirement that the damage be actual. This is the language used in most ISO forms and Florida Statutes.
Public adjusters and plaintiff contractors create replacement cost estimates based on hypothetical repairs and then depreciate those damages to arrive at an actual cash value figure. These estimates are not based on the actual cash value of property that suffered a direct physical loss.
For example, a witness might include floor and wall coverings to paint a room on a replacement cost basis. The witness would then reduce the estimate to actual cash value, which still includes the coverings for painting the room. The general contractor explains that the estimating program does not depreciate the new coverings because there is nothing to depreciate. Questions include whether the coverings were in the house at the time of loss. Were they damaged from the loss? If not, why are they part of an actual cash value estimate? The response to this is how the insurance industry calculates actual cash value.
During sinkhole years, plaintiff estimates were based on repairs, including undamaged flooring since repairs would theoretically crack all the tile. In hurricanes, undamaged products are detached and reset. These fixtures are not damaged, but they become part of a replacement cost estimate. If you use the “replacement cost less depreciation” formula, then your actual cash value estimate includes undamaged property.
The proper approach on a covered claim is to evaluate the actual cash value of the property that suffered a direct physical loss. In the hypotheticals above, you exclude the undamaged bathroom fixtures and the protective coverings. In the estimates contained in your claim files, this excludes detaching and resetting blinds, removing and resetting appliances, detaching and resetting light fixtures, dumpster loads, permits, etc.
We face estimates that include undamaged property in the calculation of actual cash value. These plaintiff experts are using much of the same software estimating programs as the insurers. Florida law has changed. The savings are available today.
David J. Salmon is a founding partner in the law firm of Groelle and Salmon, P.A. His Florida practice dates back to litigating Hurricane Andrew claims. He practices civil litigation, with his primary focus on first party insurance litigation, claims investigation and evaluation of coverage issues in property claims. He is also a certified insurance instructor. You can reach him at the firm’s St. Petersburg office at 727-209-9510, ext. 1600 or by email at [email protected]
LMA Newsletter of 10-18-21
