The court dismissed a class action suit against State Farm which sought to establish that a calculation of actual cash value (ACV) in a homeowners policy could not depreciate the cost of labor. Cranfield v. State Farm Fire & Cas. Co., 2018 U.S. Dist. LEXIS 199618 (N.D. Ohio Nov. 26, 2018)

    Cranfield submitted a claim to State Farm after his home was damaged by a storm. An adjuster inspected the damage and an estimate for repair was sent to Cranfield. The total cost to repair the damage, the replacement cost value, was $4,044.86. State Farm calculated the depreciation amount to be $1,348.57. With the deductible, State Farm sent a net ACV of $842.29 to Cranfield. 

    The policy had a two-step loss settlement provision under which State Farm paid the ACV at the time of loss. Only the ACV was paid until the actual repair was made. Once the repair was completed, State Farm would pay the additional amount that the policy holder actually spent. Cranfield filed a class action suit, challenging the manner which State Farm calculated ACV. He argued that including labor along with materials in the depreciation calculation resulted in an ACV payment that was less than he was contractually entitled. 

    The court disagreed. As used in the policy, ACV was not ambiguous. Black's defined "ACV" as "replacement costs minus normal depreciation" or fair market value. There was nothing in the policy to indicate that the intent of the parties was to limit the definition of ACV to exclude labor from depreciation. The policy did not separately insure the labor and building materials, but the sum total of these parts. Accordingly, the term ACV was unambiguous and State Farm's inclusion of labor in depreciation did not breach the policy.