Calculating RCV and ACV for Structures and Personal Property in California in 2019

Daniel Veroff | Property Insurance Coverage Law Blog | March 25, 2019

California has statutory and case law that defines replacement cost and actual cash value, and these laws are read into every insurance policy notwithstanding what the policy language says. This blog has several posts on the subject,1 and this post aims to give you one cohesive post to consult for all your questions on calculating ACV and RCV.

Actual Cash Value – Total Versus Partial Losses to the Structure

Insurance Code section 2051 proscribes how ACV is determined for partial and total losses to a structure. In some cases, the claim value changes significantly based on whether a loss is deemed total or partial. So, the preliminary question is, when is a loss total versus partial?

A California appellate court finally answered that question in 2014 after nearly a hundred years of uncertainty. In California Fair Plan v. Garnes,2 the court held that a loss to the structure is “total” if the structure has been totally destroyed; it is a partial loss if some usable portion is left.

Garnes therefore prohibits insurance companies from using the economic total loss formula frequently used in auto cases. Under that formula, some of the car remains, but the fair market value of the car before the loss is less than the cost to repair or replace minus depreciation. Under Garnes, this cannot be used in property claims.

Actual Cash Value – Total Losses to the Structure

When there is a total loss to a structure as defined in Garnes, Section 2051 requires the insurance company to make an immediate ACV payment of the fair market value of the property at the time of the loss, or the policy limits, whichever is less.

How do you determine fair market value? The law does not say. It is generally accepted in the industry that fair market value is determined by obtaining a fair market value appraisal from a certified California appraiser.

Actual Cash Value – Partial Losses to the Structure

For a partial loss to a structure, Section 2051 requires payment of the cost to repair, replace, or rebuild with materials of like kind and quality, minus a fair and reasonable deduction for physical deprecation. In other words, it is RCV minus physical depreciation. Therefore, the accepted practice is to determine the full cost to rebuild and make a deduction for physical depreciation.

Limits on Depreciation for Structural Losses

Under section 2051 and Regulation 2695.9(f)(1), depreciation must be based on the actual age and condition of the item at the time of the loss and reflect a measurable difference in the market value of the item. Regulation section 2695.9(f)(1) requires this to be set forth in writing and provided to the insured.

Under section 2051, structural components that do not normally get repaired or replaced—like interior wall studs—cannot be depreciated. Insurers must consider how that component is treated in all cases; not just in the property at issue in the claim.

Under both sections 2051 and 2695.9(f)(1), the insurance company can only take a deduction for physical depreciation. This means that items like material sales tax, labor, and overhead and profit cannot be depreciated.

Future changes to ACV laws?

We caution that there is a bill currently pending in California that may eliminate the distinction between total and partial loss payments for structural ACV claims. AB 188 would require ACV to be calculated based on the partial loss formula in either a total or partial loss. Tomorrow, Derek Chaiken of our California office will publish a separate blog post that addresses our thoughts on the proposed changes. In short, we have mixed feelings on it.

Actual Cash Value – Personal Property

Unlike structural property, there is no distinction in California law between total and partial losses. Therefore, RCV is RCV as set forth above, and ACV is RCV minus physical depreciation.

Replacement Cost Value – Structures and Personal Property

RCV is the same whether applied to a total or partial loss, and whether applied to personal or structural property. Under section 2051, the measure of indemnity for RCV is the necessary cost to repair, replace or rebuild with materials of like kind and quality.

Challenging the Insurer’s Structural RCV Estimate

Technically speaking, the law requires that the insured incur expenses above the amount of the ACV payment to receive any further RCV payments. However, in practicality insurers may be willing to make undisputed advanced payments as the replacement progresses as long as you can provide proof that the repairs are in progress and the payments are necessary to move forward.

In many cases, however, the carrier will simply issue a replacement cost estimate, deduct depreciation, and do nothing until amounts above the ACV are incurred. What if the RCV estimate from the carrier is not enough to actually replace?

Insurance Regulation 2695.9(d) states that the insurance company must provide the insured with a copy of any written estimate it bases a claim payment on. If the insured contends that the repairs will exceed the insurer’s estimate, the carrier must do one of the following three things:

  1. Pay the difference between its written estimate and a higher estimate obtained by the claimant; or,
  2. if requested by the claimant, promptly provide the claimant with the name of at least one individual or entity that will make the repairs for the amount of the written estimate. The insurer shall cause the damaged property to be restored to no less than its condition prior to the loss and which will allow for repairs in a manner which meets accepted trade standards for good and workmanlike construction at no additional cost to the claimant other than as stated in the policy or as otherwise allowed by these regulations; or,
  3. reasonably adjust any written estimates prepared by the repair individual or entity of the insured’s choice and provide a copy of the adjusted estimate to the claimant.

Replacing at a New Location

There is presently a lot of controversy around rebuilding at a new location or buying a property elsewhere. Insurance Code section 2051.5 states that an insured can choose to rebuild at another location or buying a new house, and the insurer must base its claim payment on the replacement cost at the loss location. In other words, you must determine the RCV to replace at the loss location, and that number becomes the maximum the insured can recover by replacing elsewhere.

Controversy arises as many carriers will not pay for the cost of new land. If an insured buys somewhere else, many insurers will determine the value of the land and deduct that amount from the purchase price. A similar result happens if new land is purchased and a new home is built on it. Under our view of the law, this is improper. The law does not allow for such a deduction. Carriers argue, however, that insurance does not cover land and the insured gets unjustly enriched because they end up with two pieces of land, since they get to keep the land at the original loss site. Be that as it may, insureds simply cannot replace at a new location without also buying the land, and the law does not authorize the insurer to make such a deduction. We expect to see this play out in future court battles.

Since this post aims to be a one-stop-shop for determining RCV and ACV in California in 2019, we appreciate any comments you have on issues we may not have addressed here. We will update the post as necessary in response.
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1 Seee.g., Claims Handling Requirements by State – California; California Supreme Court Affirms California Fair Plan Ass’n v. Garnes, and Preserves Homeowners’ Interests; In California, Can an Insured Homeowner Recover Full Replacement Cost by Purchasing a Home at Another Location?; Does Actual Cash Value Mean Fair Market Value or Replacement Cost Minus Depreciation?
2 11 Cal.App.5th 1276 (Cal. App. 2017).

Can An Insurer Waive Its Right to Appraisal?

Iris Kuhn | Property Insurance Coverage Law Blog | March 23, 2019

The purpose of Section 627.7015, Florida Statutes titled “Alternative procedure for resolution of disputed property insurance claims” is to encourage insurance companies and policyholders to resolve their disagreements regarding disputed property insurance claims without the necessity of litigation or appraisal. The statute requires, in part:

(2) At the time a first-party claim within the scope of this section is filed by the policyholder, the insurer shall notify the policyholder of its right to participate in the mediation program under this section.1

The statute defines a “claim” as “any dispute between an insurer and a policyholder relating to a material issue of fact. . . .”2 and it places the burden on the insurance company to provide notice to a policyholder of his or her right to participate in the statutory mediation process. If an insurance company fails to follow the notice requirements mandated in subsection (2) of the statute, the policyholder is not required to participate in the appraisal process as a condition precedent to filing a breach of contract action against the insurance company for failure to pay benefits due and owing under the policy.3

Recently, Florida’s Third District Court of Appeal decided a case involving Section 627.7015.4 The appellate court reversed the trial court’s decision compelling appraisal of the insureds’ claim where a dispute had arisen, and the insurance company demanded appraisal before it provided written statutory notice to its policyholders of their right to mediate under Section 627.7015.

In October 2017, the policyholders placed their insurance carrier, First Protective Insurance Company d/b/a Frontline (“Frontline”), on notice of their claim for property damage resulting from Hurricane Irma. A disagreement arose between the parties over whether the insureds’ windows needed to be replaced or simply repaired. The policyholders argued that their window model was no longer manufactured, and the windows would require a complete replacement.

As the dispute continued, in November 2017, the policyholders requested that Frontline provide them with copies of photographs taken by Frontline’s adjuster as part of his report. Frontline provided the report but refused to produce the photographs, alleging they were protected by the work-product doctrine. The appellate court noted that Frontline’s invocation of the work product privilege was significant because it implied that Frontline anticipated litigation as early as November 2017.5

In December 2017, the policyholders threatened to file a complaint with the Florida Department of Financial Services. In response, Frontline produced a sample estimate, which left most of the insureds’ questions and concerns unanswered. The policyholders then informed Frontline of their intent to retain counsel.

It was not until several months later that Frontline sent a written demand to the policyholders invoking the appraisal process under the policy. In June 2018, after Frontline had invoked the appraisal process, it provided notice to its policyholders of their right to pursue mediation under section 627.7015. In July 2018, the policyholders filed suit and Frontline moved to compel appraisal. The trial court granted Frontline’s motion, and the policyholders appealed the trial court’s decision.

The Third District concluded that Frontline could not demand appraisal without first providing its policyholders with notice of their right to mediation under state law. The court reasoned:

[S]ection 627.7015 furthers the ’particular need for an informal, nonthreatening forum for helping parties. . . because most homeowner’s . . . residential insurance policies obligate [the] insureds to participate in a potentially expensive and time-consuming adversarial appraisal process prior to litigation.6

It further noted that,

Frontline’s actions are in derogation of the salutary purpose of section 627.7015, i.e., to expeditiously bring the parties together for a mediation without any of the trappings of an adversarial process.7

The court held that once a dispute has arisen, an insurance company cannot demand appraisal before providing the policyholder with notice of his or her right to participate in mediation. By doing so, an insurer waives its right to appraisal.

The waiver of appraisal is a complicated matter. Appraisal can be waived through many actions, and it varies from state to state. Never hesitate to contact a Merlin Law Group attorney with specific questions on this topic or others. Please make certain to use our search function if you have other questions about property insurance claims and policyholder rights.
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1 §627.7015(2), Florida Statutes (Emphasis added).
2 §627.7015(9), Florida Statutes.
3 §627.7015(7), Florida Statutes.
4 Kennedy v. First Protective Ins. Co. d/b/a Frontline Insurance, No. 3D18-1993, 2019 WL 1051386 (Fla. 3rd DCA Mar. 6, 2019).
5 Id. at *1.
6 Id. at *2. See also Universal Prop. & Cas. Ins. Co. v. Colosimo, 61 So. 3rd 1241, 1242 (Fla. 3rd DCA 2011).
7 Id. at *2.

A Good-Faith Attempt to Limit Unwarranted Bad-Faith Liability in Georgia

Tiffany L. Powers, Kyle G.A. Wallace and Bryan W. Lutz | Alston & Bird | March 20, 2019

A victory for insurers in Georgia’s Supreme Court clarifies state law on liability for failing to settle a claim. Our Insurance Litigation & Regulatory Team offers three key holdings that will limit an insurer’s potential exposure.

  • The injured party must present a valid offer
  • Whether a claimant has made a valid offer to settle is a legal question
  • Insurers may exhaust the policy limits by settling one of multiple claims

In a recent victory for insurers by Alston & Bird’s insurance team before the Georgia Supreme Court, the court issued an opinion in First Acceptance Insurance Co. of Georgia v. Hughes clarifying longstanding (and much debated) Georgia law governing an insurer’s liability for failing to settle a claim within the policy limits. The court held that a claimant’s ambiguous demand letter did not create a duty for the insurer to settle a claim, shedding light on three key aspects of Georgia law:

  • Insurers have no duty to settle a claim until they receive a valid offer to settle.
  • Demand letters are construed by the court with the principles of general contract construction, with ambiguous terms to be construed against the drafter.
  • Insurers have no duty to settle one of multiple claims when there is no time-limited demand and the claimant has expressed a willingness to engage in a joint settlement conference.

Georgia Law on Liability for Bad-Faith Failure to Settle Claims Against an Insured

The Georgia Supreme Court recently stepped in to clarify Georgia’s law governing an insurer’s liability for failing to settle a claim within the policy limits. Decades ago, the Georgia Supreme Court announced a rule in Southern General Insurance Co. v. Holtthat if an insurer acts in bad faith by refusing to settle a claim for an amount within the policy limits, it may be liable for the full amount of any judgment against the insured. The reason for the rule was simple: to encourage insurers to settle to avoid liability to their insured for judgment amounts exceeding the insurance coverage rather than take a chance at a trial where the insurer will face the same policy-limits maximum exposure but will possibly save money if the insured is found not liable.

In the 27 years following Holt, however, the rule has been weaponized. Plaintiffs’ attorneys have recognized that when the person at fault in a catastrophic accident may be rendered insolvent by a massive judgment, the insurer is often the only possible source to collect from. In these instances, plaintiffs’ attorneys have every incentive to break through the contractual limits of the insurance policy and to seek collection of the entire judgment from the insurer. Holt provided an inlet with its bright-line rule. As a result, rather than promoting settlement, the Holt rule has often been used as a trap to ensnare unwary insurers through the use of strategic “set-up” demands to create bad-faith liability even when the claimant never truly intends to settle their claim for an amount within the policy limits. Set-up tactics have included demand letters that require hand delivery of settlement payments within an unrealistic timeframe and vague and confusing demands that may not fully release all claims. These tactics have become so widespread that plaintiffs’ attorneys have actually created continuing legal education seminars to instruct on their use.

The Georgia Supreme Court’s Opinion in Hughes

Although the Georgia legislature took action to curb the abusive tactic of sending time-limited demands,[1] the Georgia Supreme Court recognized in Hughes that the law governing bad-faith liability needed further reform. In Hughes, the insured caused a car accident that seriously injured multiple parties and resulted in the insured’s death. The insurer, recognizing the $50,000 policy limit would quickly be exhausted, attempted to schedule a joint settlement conference with all injured parties. One of the injured parties (on her own behalf and her minor child’s) sent two letters to the insurer on the same day: (1) a letter expressing interest in a joint settlement conference and alternatively offering a limited release that would carve out claims for uninsured motorist coverage upon payment of the policy limits and receipt of coverage information; and (2) a letter requesting coverage information within 30 days.

After 41 days, the attorney “withdrew” the offer, filed suit, and the claimants at issue were awarded a judgment of $5.3 million against the insured’s estate. The estate then filed suit against the insurer for the full amount of the judgment. The trial court granted the insurer’s motion for summary judgment, finding that the insurer could not have reasonably known that all of the injured parties’ claims could have been settled within the policy limits. The Georgia Court of Appeals reversed, relying on a rigid application of Holt, finding that a jury could find that a demand had been made with a “purported 30-day time limit” and that the insurer failed to settle the two claims at issue within that timeframe. The Georgia Supreme Court reversed the court of appeals, finding that there was no “time-limited” demand for settlement and that the insurer could not be liable for bad-faith failure to settle when the claimant unilaterally withdrew a pending offer that had no express time limit. 

Georgia’s highest court in Hughes made three key holdings that work to further limit an insurer’s potential exposure from the use of set-up demands:

An insurer’s duty to settle does not arise until the injured party presents a valid offer.

The court in Hughes held that insurers cannot be liable for excess judgments if the claimant never presented a valid offer to settle a claim within the insured’s policy limits. Before Hughes, courts had openly questioned whether under Georgia law an insurer could be liable for bad-faith failure to settle even without an express offer to settle for the policy limits. Many plaintiffs argued that an insurer had an obligation to initiate settlement discussions or make an offer even if the claimant had not. However, the court in Hughes recognized that such a rule would encourage after-the-fact testimony that a claimant would have settled every time a judgment is entered that exceeds the policy limit. 

By holding that a claimant must first present a valid offer to settle within the policy limits, the court has provided insurers with a powerful defense to set-up demands that are vague, contradictory, or fail to settle the entire claim. In those instances, insurers can argue that there was no valid offer to “accept” that would avoid future liability for the insured.

Whether a claimant has made a valid offer to settle is a legal question decided by the court according to the general rules of contract construction.

The court also struck at the heart of set-up demands that provide vague, confusing, or contradictory terms by holding that courts must construe the validity of an offer as a matter of law, resorting to a jury only if ambiguity remains after applying the rules of contract construction. Ambiguous demand letters are construed against the drafter—in this instance, the claimant. Before Hughes, plaintiffs often sought to avoid summary judgment (and to appeal to sympathetic jurors) by arguing that the interpretation or intent of a demand letter was a fact question that was appropriately resolved at trial and by arguing that agreements are generally construed in favor of the insured or claimant.

The court in Hughes clarified that demand letters are to be construed against the injured party, and that if its terms are “too indefinite for a court to [ ] determine, there can be no assent thereto” and the offer is not valid. Applying this basic rule of contract interpretation, the court held as a matter of law that there was no time-limited demand when a claimant mailed two separate letters—one expressing a willingness to attend a joint settlement conference or, in the alternative, to settle the claims if insurance information was provided, and the other requesting insurance information within 30 days. In light of Hughes, insurers will have a powerful defense when faced with vague, confusing, or contradictory demand letters.

Insurers may exhaust the policy limits by settling one of multiple claims, but need not do so absent a time-limited demand.

Finally, the court addressed the situation insurers face when there are multiple claimants involved. It has long been the rule that an insurer may settle one claim that exhausts the policy limits without incurring liability for excess judgments resulting from litigation by the non-settling claimants. However, Hughes clarifies that an insurer has no obligation to settle one of multiple claims for the full policy limits, absent a time-limited demand.

However, Hughes should not be seen as limiting an insurer’s potential liability in the face of a valid time-limited demand—even in the context of multiple claimants. The court noted that in Hughes, the two claimants at issue “expressed their interest in attending a settlement conference with the other claimants.” Consequently, the insurer’s failure to settle with the two individual claimants was “reasonable as an ordinarily prudent insurer could not be expected to anticipate that, having specified no deadline for the acceptance of their offer, [the claimants] would abruptly withdraw their offer and refuse to participate in the settlement conference.”


[1]  Effective July 1, 2013, Georgia enacted a law that provided insurers with a minimum of 30 days to respond to a time-limited demand and clarified that an insurer’s request for clarification of an offer letter will not be deemed a rejection and counteroffer. O.C.G.A. § 9-11-67.1(a)(1), (d).

The Economic Loss Rule and Why It Matters in Construction Litigation

William S. Durr | Ward and Smith | March 20, 2019

In its broadest sense, the “economic loss rule” prohibits recovery in tort for purely economic loss incurred under contract law. 

The Merriam-Webster Dictionary online defines tort as “a wrongful act other than breach of contract for which relief may be obtained in the form of damages or an injunction.”  Negligence, the most common tort claim, is the failure to exercise the care that a reasonably prudent person would exercise in similar circumstances.  Thus, where a contract exists governing the subject matter of the dispute, claims between the parties must be based on the contract terms, and a tort-based claim between the parties will typically be barred.

The rationale for the economic loss rule is that where a contract exists, the parties have freely negotiated to include or exclude terms governing the parties’ respective rights, obligations, and remedies.  If a party to that contract could extend its remedies beyond those set forth in the contract, this would effectively allow the party to obtain something more than (or inconsistent with) what they bargained for in the contract.  This is especially true in the products liability context, where the economic loss rule first arose.

In 1978, some twelve years prior to the express adoption of the economic loss rule, the North Carolina Supreme Court addressed the essential elements of the rule (without referring to it by name in the decision) in a dispute between an owner and general contractor.  The case, North Carolina State Ports Authority v. Lloyd A. Fry Roofing Co., et al., 294 N.C. 73, 240 S.E.2d 345 (1978), involved a claim for damages arising from leaking roofs.  The owner, the North Carolina State Ports Authority, asserted two claims against the general contractor, as well as other project participants.  One claim was for breach of the construction contract, the other for negligence in constructing and installing the roofs.  The Court found that a tort claim is unavailable “against a promisor for his simple failure to perform his contract, even though such failure was due to negligence or skill.”

The North Carolina Court of Appeals expressly adopted the economic loss rule in a 1990 products liability case, Chicopee v. Sims Metal Works, 98 N.C. App. 423, 391 S.E.2d 211 (1990).  Since Chicopee, case law has intertwined the concepts set forth in Ports Authority and Chicopee and extended the economic loss rule to a number of other substantive areas.

There are exceptions to the economic loss rule.  Ports Authority identifies the following exceptions:

  1. The promisor’s negligent act or omission in the performance of the contract caused injury to the person or property of someone other than the promisee.  By way of example, if a crane falls over and injures a third party who had no connection to the promisee, a claim for negligence brought by the third party against the crane supplier would not be barred by the economic loss rule, as there was not a contract between the crane supplier and the third party.
  2. The promisor’s negligent, or willful, act or omission in the performance of his contract, caused injury to property of the promisee other than the property which was the subject of the contract, or personal injury to the promisee.  Thus, if a crane fell over and damaged the utility lines of the building and the contract with the crane supplier did not involve work on the utility lines, a claim for negligence against the crane supplier for damage to the utility lines would not be barred by the economic loss rule.  This makes sense as the contract with the crane supplier did not include or govern the utility lines and, therefore, there was not a contract that applied to the specific subject matter of the dispute (the utility lines that were damaged).
  3. The promisor’s negligent, or willful, act or omission in the performance of his contract, caused loss of or damage to the promisee’s property, which was the subject of the contract, and the promisor had a legal duty, as a matter of public policy, to use care in the safeguarding of the property from harm, as in the case of a common carrier, an innkeeper or other bailee. 
  4. The injury caused by the promisor to the promisee was a willful act.  

In applying and, in many cases, expanding these exceptions, the relevant inquiry under North Carolina law is whether the injured party has a basis for recovery in contract or warranty.  If there is a basis for recovery under a contract or warranty provision, then the Court will generally recognize and apply the economic loss rule, provided that there is not an independent legal duty which is identifiable and distinct from the contractual duty.  See, Bradley Woodcraft, Inc. v. Bodden, 795 S.E.2d 253, 258-59 (2016).  By way of example, an architect is held to a professional standard of care.  While this professional standard of care may be referred to in the contract between owner and architect, the duty to adhere to a professional standard of care is an independent legal standard and the owners’ tort claims against the architect are not barred by the economic loss rule. Put simply, the architect cannot contract away its obligations to perform at a minimum professional standard of care.    

In Bradley Woodcraft, the homeowner entered into a contract with the general contractor to undertake some interior finish work and kitchen remodeling.  The homeowner became dissatisfied with the contractor’s work.  After meeting with the contractor the homeowner paid the contractor an additional sum, using two credit card transactions.  The homeowner testified that payment was made with the understanding that the contractor would complete the project.  The contractor took the funds but never returned to the job.  The homeowner disputed the two credit card charges, which were reversed by the credit card company.  The contractor sued the homeowner for breach of implied and express contract, and the homeowner counterclaimed, alleging among other claims, breach of contract and fraud.  The homeowner argued that their fraud claim should survive the economic loss rule defense.  The Court agreed, “…while claims for negligence are barred by the economic loss rule where a valid contract exists between the litigants, claims for fraud are not so barred…”  Bradley Woodcraft at 259.  Bradley Woodcraft seems to suggest that a tort claim, other than negligence, will survive in an otherwise clear contractual dispute and not be subject to the economic loss rule. 

Fortunately, a 2018 federal case rejected the broad statement that the economic loss rule barred only negligence claims and distinguished Bradley Woodcraft by stating that the proper inquiry is whether there is an independent legal duty, which is identifiable and distinct from the contractual duty.  Legacy Data Access, Inc. v. Cadrillion, LLC, 889 F.3d 158, 166 (4th Cir. 2018).      

An earlier construction case, Lord v. Customized Consulting Specialty, Inc., 182 N.C. App. 635, 643 S.E.2d 28 (2007), allowed the owners of a home to pursue a tort claim against a subcontractor, holding the economic loss rule did not bar claims of negligence given the particular facts of the case.  In this case, the homeowners (Lords) discovered the trusses used to construct their home were defective.  The Lords sued their contractor (Customized Consulting Specialty, Inc.) and the subcontractor who designed the trusses.  The claims against the subcontractor included a negligence claim.  The subcontractor argued the economic loss rule applied to bar the homeowners’ negligence claim, relying on the holdings from several cases involving damage resulting from the use of synthetic stucco, some decided in Federal Court. The North Carolina Court of Appeals rejected the subcontractor’s arguments.  The Court found that no contract existed between the subcontractor and the homeowners, that the economic loss rule did not apply and that the economic loss rule did not operate to bar the homeowners’ negligence claim.     

In summary, while the economic loss rule does not provide an absolute defense to all tort claims, it must certainly be considered in litigation that involves claims sounding in both contract and tort. 

More importantly, the protection of the economic loss rule begins with the contract itself.  Creating, maintaining, and properly executing well-drafted contracts is a foundational requirement to controlling and allocating risk in the construction industry.  If you give less attention to your contracts than you do other details of a project, you are placing your company at risk, as you may find yourself defending both contract and tort claims.

Getting the Xactimate Construction Price Right!

Chip Merlin | Property Insurance Coverage Law Blog | March 21, 2019

Xactimate construction price expert Steve Shannon told me that Merlin Law Group should make a seminar called, The Price is Right! I was listening to him and OSHA expert witness, Kevin Dandridge, discuss various issues of construction worker and site safety and where those costs should show up in insurance claim estimates.

All insurance adjusters should make certain that a construction estimate is made which is legal. If a construction estimate does not have inclusion of OSHA laws, it is an estimate of illegal construction. Insurance company adjusters should not be writing estimates which are illegal. Yet, it is common because many adjusters lack education or experience regarding OSHA laws and how construction is done.

Here is a list of some OSHA items which all contractors and subcontractors have to comply with and which insurance adjusters and estimators have to consider:

  • 1926.20 General safety and health provisions
  • 1926.21 Safety Training and Education
  • 1926.23 First aid and medical attention
  • 1926.24 Fire protection and prevention
  • 1926.25 Housekeeping
  • 1926.26 Illumination
  • 1926.27 Sanitation
  • 1926.28 Personal protective equipment

Steve Shannon made a point that older versions of the Xactimate training workbook had a specific section on OSHA requirements for roofing estimates because it is so complicated. It has been removed from more current workbooks, but the line items still exist for the adjusters to add the line items. A copy of that portion of the workbook is attached.

Dandridge and Shannon have extensive experience with actual construction and practices. They told me of significant fines placed on contractors and subcontractors for not doing legal construction complying with OSHA. They emphasized the point that OSHA laws apply to residential and commercial construction.

I encourage all property insurance adjusters and their managers, whether you are a company, independent or public adjuster, to get education on OSHA and Certification from Xactimate. Your estimates will be more accurate and reflect legal construction.