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Does the Value of Labor Depreciate?

On December 10, 2015, the Arkansas Supreme Court held that a property insurer may not depreciate labor when calculating actual cash value (ACV).  The court’s opinion may be best summarized in one sentence:  “[t]he very idea of depreciating the value of labor is illogical….”

The name of the case is Shelter Mutual Ins. Co. v. Goodner, 2015 Ark. 460 (Ark. Dec. 10, 2015).  Despite a detailed discussion of the principle of indemnity and the concept of depreciation, the court concluded that labor, by its very nature, is not depreciable.  Though a number of commentators and other courts support the opposite result, i.e. allowing the reasonable depreciation of labor, the Arkansas Supreme Court saw it differently and held that the depreciation of labor is against public policy.

This issue remains a hot one and continues to generate national attention.  In Pennsylvania, there’s currently a pending federal class action against State Farm venued in the Western District and more cases likely to follow.  We’re anticipating that NY and NJ, as a broad evidence rule states, will soon see the issue as well. 

We will continue to keep you advised regarding the national reaction to this decision and the evolution of this issue. 

Please direct any questions to Timoney Knox partners, Bob Horst or Bill Krekstein.

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Bob HorstDirect Dial: 215-540-2657 or  rhorst@timoneyknox.com

 

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Bill Krekstein: Direct Dial 215-540-2624 or wkrekstein@timoneyknox.com

 

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