Class Action Involving Application of Deductible to Actual Cash Value Payment

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An emerging issue in class action litigation against the insurance industry involves an attempt by plaintiffs’ attorneys to argue that insurers should not be permitted to apply any deductible to payments made on an actual cash value basis. Most homeowners and commercial property insurance policies provide for insurers to make an initial payment for the actual cash value of the damage (often calculated as the estimated replacement cost less depreciation), and then, after the repairs are completed, make an additional payment so that the total amount paid is the replacement cost value of the damage (in accordance with the terms of the policy).

In Bond v. Liberty Ins. Corp., 2017 U.S. Dist. LEXIS 114778 (W.D. Mo. July 24, 2017), the court, which had previously certified a class, granted, in part, the plaintiffs’ motion for summary judgment. The court reasoned that “[b]oth the Home Protector Plus Endorsement and base policy’s respective loss settlement provisions are silent regarding an ACV deductible in the face of their explicit references to an RCV deductible. This silence suggests the parties did not intend to make the deductible applicable to ACV payments.” The court rejected the insurer’s argument that the declarations page indicated that a deductible would apply, as well as other arguments raised by the insurer.

This decision appears to be contrary to longstanding, well-established insurance industry practice. I would not be surprised if the rulings in this case lead to additional class action filings against insurers in Missouri and perhaps other jurisdictions as well.

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