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Illinois Supreme Court Rules on ACV and Depreciating Labor Costs

May a homeowners insurer may depreciate labor costs when calculating the actual cash value (ACV) after a covered loss?

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The Illinois Supreme Court has determined that a homeowners insurer may not depreciate labor costs in calculating the actual cash value (ACV) after a loss under the policy. The case is Sproull v. State Farm Fire & Cas. Co., 2021 IL 126446.

Jarret Sproull was insured under a homeowner’s policy that provided replacement cost coverage for structural damage. Under the policy terms, covered losses were paid in two parts; an ACV payment and then a replacement cost value (RCV) payment if repairs or replacements were completed within two years and the insurer was notified in a timely manner. The policy failed to define “actual cash value.”

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