The insurer's depreciation of labor in the calculation of actual cash value was found to be against Arkansas public policy. Shelter Mut. Ins. Co. v. Goodner, 2015 Ark. LEXIS 460 (Ark. Dec. 10, 2015). Shelter Mutual's policy provided that it would pay the insured "the actual cash value of all the damaged parts of the covered property." "Actual cash value" was defined as "total restoration cost less depreciation." The policy explained, "When calculating depreciation, we will include the depreciation of the materials, the labor, and the tax attributable to each party which must be replaced to allow for replacement of the damaged part, whether or not that part is damaged." The Goodners property incurred a loss. Shelter Mutual estimated the total restoration cost to be $10,319.23. With a deduction for depreciation for $3,397.24, the estimated actual cash value came to $6,921.99. The deduction for depreciation included depreciation of both materials and labor. The Goodners filed suit for declaratory judgment. The trial court granted summary judgment in favor of the insureds. Following a prior case, Adams v. Cameron Mut. Ins. Co., 430 S.W. 3d 675 (Ark. 2013), the court found that depreciation of labor in calculating actual case value was against public policy in Arkansas. In Adams, the court held that the costs of labor may not be depreciated when determining the actual cash value of a covered loss under an indemnity policy that did not define the term "actual cash value." Shelter Mutual argued that a different result was justified here because its policy did define "actual cash value" and defined it to include depreciation of labor. In Adams, the court concluded that the concept of depreciating labor was illogical and inconsistent with the principle of indemnity. The holding applied here with equal weight.
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