Insurance Online : Depreciating Labor Costs May be Factor in Actual Cash Value

   The Minnesota Supreme Court considered a certified question from the the U.S. District Court regarding consideration of depreciating labor costs in determining the actual cash value of a loss. Wilcox v. State Farm Fire & Cas. Co., 2016 Min. LEXIS 50 (Minn. Feb. 10, 2016).    The insureds' home was damaged by hail. State Farm provided a written estimate that calculated the actual cash value of the loss. To estimate the actual cash value of the damaged property, State Farm first calculated the replacement costs of individual items, such as roof flashing, siding, fascia, gutters, and window screens. Next, State Farm subtracted the pre-loss depreciation of some, but not all, individual items. For example, State Farm depreciated the cost of removing and replacing certain materials, such as siding. State Farm did not depreciate the cost of the new siding separately from the cost of the labor required to install the new siding on the home. Instead, State Farm calculated the removal and replacement of the siding as a single cost, then depreciated the removal-and-replacement cost as a whole. The cost of labor to repair or replace the damaged property was referred to by the court as "embedded labor costs."    Suit was filed, alleging that State Farm's practice of depreciating embedded labor costs breached the duty to indemnify the insured for the actual cash value of the damaged property. The policy provided that State Farm would pay "only the actual cash value at the time of the loss of the damaged party of the property" until the property was repaired or replaced. Then State Farm would pay the full repair or replacement costs. "Actual Cash Value" was not defined by the policy, nor were the methods described for calculating actual cash value.    State Farm moved to dismiss the complaint. The magistrate judge concluded that labor depreciation was not permitted when the policy did not define "actual cash value" and recommended that the district court deny State Farm's motion to dismiss. The district court certified the question regarding depreciation of embedded labor costs to the Minnesota Supreme Court.    Minnesota adopts the broad evidence rule in calculating the actual cash value of a loss. The breadth of discretion provided to the trier of fact under the broad evidence rule was the best method to assure complete indemnity to the insured. The rule provided a flexible approach that considered several relevant facts such as the original cost of the property, the market value of the property at the time of loss, the cost of reconstruction, the cost of removing debris, the amount of salvage, and the potential remaining uses of the property. The jury could also consider opinions on value given by expert witnesses.     The broad evidence rule did not dictate whether labor was depreciable or not depreciable. Rather, embedded-labor-cost depreciation was one factor that the trier of fact could consider amoung other factors to determine the actual cash value of the damaged property.     Therefore, the court answered the certified question as follows:     When a homeowner's policy does not define the term "actual cash value" or otherwise state whether embedded labor costs are depreciable for the purpose of calculating actual cash value, the trier of fact may consider embedded-labor-cost depreciation when such evidence logically tends to establish the actual cash value of a covered loss. Embedded-labor-cost depreciation, however, is only one of many factors to be considered by the trier of fact; and its relevance depends on the facts and circumstances of the particular case.

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Insurance Online : Ninth Circuit Holds Efficient Proximate Cause Doctrine Applies Beyond All-Risk Policies

   The Ninth Circuit held that the efficient proximate cause doctrine is not limited to all-risk policies. Olin Corp. v. Continental Cas. Co., 2016 U.S. App. LEXIS 4905 (9th Cir. March 17, 2016).     Olin operated a plant that produced industrial chemicals. Continental issued a policy covering the plant's boilers and machinery. In late 2008, the machinery was damaged. Continental denied coverage for damage to Olin's diaphragm cells, which were tanks containing metal cathodes covered by asbestos diaphragms. Continental argued that the damage to the cells was not covered because it was not caused by an "accident." The jury returned a verdict in favor of Olin.     Continental appealed. It first argued that the district court erred in applying the efficient proximate cause doctrine. Under the doctrine, the peril that set in motion the chain of events leading to the loss or the "predominating cause" was deemed the efficient proximate cause or legal cause of the loss. The Ninth Circuit disagreed that the doctrine only applied to all-risk policies.    Next, Continental argued that because its policy covered only "direct damage" to covered property caused by a covered cause of loss, the policy language precluded the use of the efficient proximate cause doctrine. Under the policy language, coverage existed only when a covered peril was the last link in the causal chain that terminated in the damage, and not when a covered peril only sets in motion the chain of events leading to the loss. No cases were cited by Continental to support its argument, however. The court found that the use of "direct damage" in the policy was consistent with the efficient proximate cause doctrine.    Continental next contended that the district court erred in determining that the word "corrosion" in the policy was ambiguous as applied to the facts of this case. The issue was whether the term "corrosion" included the penetration of magnetite dendrites into asbestos diaphragms that were baked onto metal cathodes inside the cells. The Ninth Circuit determined that the district court correctly determined that whether this process was "corrosion" was ambiguous. The policy did not define "corrosion." Moreover, the asbestos diaphragms did not themselves corrode. Instead, the metal cathodes corroded, and byproducts of this corrosion penetrated the diaphragms, causing them damage. Because the word "corrosion" as applied to this case led to multiple reasonable interpretations, the district court correctly determined that the term was ambiguous.    The district court's judgment was affirmed.

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Insurance Online : Seeing Green: Simple Tips to Increase Your Home’s Energy Efficiency

Maintaining a home comes with many costs. According to PURE Energies, an average home utility bill in the United States is a hefty $163 per month—a number that can fluctuate based upon usage and location. If you want to save money on your water and power bill to put toward that summer beach trip, follow these tips.

Go with the low-flow.

Installing low flow-faucets and showerheads can save gallons of water — and money.  Standard showerheads use five to 10 gallons of water each minute, while low-flow versions use just over two in the same amount of time.

Toilet won’t stop running? Catch the leak.

Even toilet tanks that have a slow leak can waste several gallons of water each day. The cost of this wasted water will drain your wallet over time. To see if your toilet is leaking, place a few drops of food coloring in the tank. If you start to see color in the bowl after 30 minutes without flushing it, you likely have a leak.

Insulate, insulate, insulate.

According to Kateri Callahan, president of the Alliance to Save Energy, 50% of homes in the U.S. don’t have enough insulation. Inadequate insulation allows warm air to escape in the winter and cool air to escape in the summer. Improving your insulation is an easy way to help your home stay comfortable and keep your energy bill at a minimum.

Keep drafts at bay.

Drafty windows and doorways take a toll on your home’s energy efficiency. To keep your heating and cooling system from working overtime, recaulk the places where air could easily escape. According to EnergyStar, the leader in home energy efficiency, homeowners could save up to $200 a year through this simple repair.

Invest in efficient appliances.

Although it initially seems like an unnecessary expense, replacing appliances with energy-efficient models will be worth the investment. These appliances require less power to do the same job, and your neighbors will be green with envy when they hear about the decrease in your bill.

Keep the green in your pocket.

Spending data collected by Mint.com shows that utility costs are going up—but you have the power to lower your bill. With a few simple home upgrades and routine maintenance, you’ll start to see a decrease in how much you pay for water and utilities.

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Insurance Online : Seeing Green: Simple Tips to Increase Your Home’s Energy Efficiency

Maintaining a home comes with many costs. According to PURE Energies, an average home utility bill in the United States is a hefty $163 per month—a number that can fluctuate based upon usage and location. If you want to save money on your water and power bill to put toward that summer beach trip, follow these tips.

Go with the low-flow.

Installing low flow-faucets and showerheads can save gallons of water — and money.  Standard showerheads use five to 10 gallons of water each minute, while low-flow versions use just over two in the same amount of time.

Toilet won’t stop running? Catch the leak.

Even toilet tanks that have a slow leak can waste several gallons of water each day. The cost of this wasted water will drain your wallet over time. To see if your toilet is leaking, place a few drops of food coloring in the tank. If you start to see color in the bowl after 30 minutes without flushing it, you likely have a leak.

Insulate, insulate, insulate.

According to Kateri Callahan, president of the Alliance to Save Energy, 50% of homes in the U.S. don’t have enough insulation. Inadequate insulation allows warm air to escape in the winter and cool air to escape in the summer. Improving your insulation is an easy way to help your home stay comfortable and keep your energy bill at a minimum.

Keep drafts at bay.

Drafty windows and doorways take a toll on your home’s energy efficiency. To keep your heating and cooling system from working overtime, recaulk the places where air could easily escape. According to EnergyStar, the leader in home energy efficiency, homeowners could save up to $200 a year through this simple repair.

Invest in efficient appliances.

Although it initially seems like an unnecessary expense, replacing appliances with energy-efficient models will be worth the investment. These appliances require less power to do the same job, and your neighbors will be green with envy when they hear about the decrease in your bill.

Keep the green in your pocket.

Spending data collected by Mint.com shows that utility costs are going up—but you have the power to lower your bill. With a few simple home upgrades and routine maintenance, you’ll start to see a decrease in how much you pay for water and utilities.

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Insurance Online : Homeowner's Mold Claim Denied Due to Spoilation

   The trial court's issuance of summary judgment to the insurer for mold and water damage was upheld on appeal. Schwartz v. Encompass Indem. Co., 2016 Mich. App. LEXIS 551 (Mich. Ct. App. March 15, 2016).     The contractor was demolishing a portion of the insured's home when he discovered water damage and what appeared to be mold. The contractor believed this damage was due to improper roof installation and leaks around the windows. Further demolition was done to water-damaged portions of the home.     The insured filed a claim with Encompass for mold and "over-demolition." When Encompass's adjuster inspected the home, none of the alleged mold-affected material was present because it had been removed from the site by the contractor. The claims were denied.    The insured filed suit and Encompass moved for summary judgment. The trial court found that both the claim for mold and over-demolition were covered losses. However, the insured could not recover on the mold because of spoilation of evidence, and was precluded from recovery on the demolition claim due to the exclusion for faulty workmanship.    The appellate court agreed. The insured sought to recover costs associated with the contractor's extensive demolition. The demolition was done either due to the contractor's error or his faulty workmanship, or due to the contractor's addressing faulty workmanship of the persons responsible for the roof and window installation. The contractor was the insured's agent. The insured presented evidence that the contractor acted in error, but even if the contractor's work was faulty, it was excluded under the homeowner's policy.     The insured also argued that the trial court erred in attributing the contractor's disposal of the evidence of mold to the insured. The insured felt the adjuster had a duty to recover the disposed evidence. But the insured had a duty under the policy to allow the insurer "to take samples of damaged and undamaged property for inspection, testing and analysis." This became impossible because the allegedly moldy material was thrown into dumpsters, mixing with other construction debris and was not protected from the weather.     While dismissal of the claim seemed harsh where the insured apparently lacked some degree of knowledge or control over the initial methods in which the materials were removed and disposed of, it was of greater prejudice to Encompass who had absolutely no control over the evidence.

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