27th Apr 2015

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Adjustment “process” where replacement cost coverage is requested

On a typical basis, the way the losses are handled is that the insured and insurer reach an agreed scope and cost of repairs.  For that amount the insurer will take away depreciation.  See Insurance Code § 2051; § D30 DEPRECIATION [§ D30:4 Depreciation in partial loss cases].  The insurer then issues the actual cash value payment up front.  See § R51:8 Actual replacement as condition of payment by insurer of replacement cost indemnity.  From the time that the ACV payment is issued, the insured has 180 days to basically show that they have completed, or near completion of, the actual repairs.  From that point the insured can come back and receive the amount of the withheld back depreciation.  [Stephens v. Fireman’s Fund (2014) 231 Cal. App. 4th 1131, 1138-1139]

Showing of insured required at trial

If the issue in the litigation and trial is the insured’s claim for replacement cost coverage and the amount thereof, the insured must present evidence of the actual cash value of the damaged property.  This showing must take place even if the insurer has interfered with the insured’s repair or replacement of the property because such a showing is required by the policy provisions.  [Stephens v. Fireman’s Fund (2014) 231 Cal. App. 4th 1131, 1145-1146].  If, at trial, the insured disclaims recovery of ACV damages, the insured waives an award based on this measure.  Nonetheless the insured is entitled to a judgment awarding replacement cost coverage but only if the insured proves it actually completed the repairs “as soon as reasonably possible”, AFTER the judgment becomes final.  [Stephens v. Fireman’s Fund (2014) 231 Cal App. 4th 1131, 1146]

References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2014), published by ThomsonReuters (1-800-344-5008).  Those with WestLaw can search using the database CAINLAWDDR.

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