What is “Actual Cash Value” vs “Replacement Cost Value” in property insurance?

When you’re purchasing an insurance policy for your property you will likely be given many different choices provided by different carriers. Deductibles, coverage amounts, and annual premiums will all vary in different ways. But, it’s important to know how the value of the damage will be measured when its time for your insurance carrier to make a payment for your insurance loss. These options come in two flavors: “Actual Cash Value” or “Replacement Cost Value”. In order to understand the difference between the two, you must first understand what Replacement Cost Value is.

“Replacement Cost Value” or RCV

Replacement Cost Value (or “RCV”) determined by measuring what it would cost to replace the damaged structure on the same premises. When determining RCV, you only examine the cost to replace the damaged item without looking at the condition or age of the damaged item. For example, if your wall is broken, the replacement cost value of the damaged property is going to be whatever it costs to fix that wall in the same or similar condition it was before it was damaged. For example: if your 10-year-old shingle roof gets ripped off during a hurricane, then the value of that loss is cost of replacing that missing roof with a new shingle roof. It doesn’t matter how old your roof was when it got destroyed. If it costs $20,000.00, then the RCV of the loss is $20,000.00.

“Actual Cash Value” or ACV

“Actual cash value” is generally defined as “fair market value” or replacement cost minus normal depreciation,” where depreciation is defined as a “decline in an asset’s value because of use, wear, obsolescence, or age.” With these definitions, actual cash value could be measured in different ways:

First let’s talk about Fair market value. Fair market value is what the damaged property would cost if you were examine other properties of like kind and quality. For example, appraisers in the real estate market will inspect your property, then compare it to similar properties in your neighborhood, then determine the value of your property. Another example is when you’re looking to buy a used cell phone on Ebay or Amazon, the market will dictate the value of that item or good. Fair market value can be a wide range of valuations that take in consideration different variables such as the age, quality, availability, and condition of a piece of property.

However, Insurance companies commonly determine Actual Cash Value by using the “RCV minus depreciation” approach. This is accomplished by looking at the damaged property and determining what it will cost to fix it or replace it using like-kind quality materials. In practice they first determine how much it would cost to replace the property and assign it a dollar value (“RCV”). Then they subtract an amount which takes in consideration of how old, used, or worn out the property was before it was damaged (Depreciation). Let’s look at the breakdown using a VERY simple example of $600 cabinets.

The Value of New Cabinets of similar type RCV $600
Given the age, condition, and wear of the cabinets, we’ll say they cabinets were depreciated about 10% Depreciation $60 (10%)
New cabinets – depreciation = ACV ACV $540

Somehow, the adjuster found like-kind and quality cabinets for $600. Then the adjuster will examine the damaged cabinets, maybe see a bit of wear and tear, and determine that the cabinets were somewhat old and will estimate and apply 10% depreciation amount to the valuation. Subtracting the 10% ($60) of $600 dollars comes to an actual cash value payment of $540. This is basically how these determinations are made in the property insurance industry.

Here’s a tougher example: Let’s say when you bought your home it already had kitchen cabinets installed. One day your home suffers a covered loss and part of that loss includes your kitchen cabinets. Now you have damaged kitchen cabinets and have no idea what it cost to get those cabinets installed. How do you determine the value if those cabinets are no longer manufactured? This should not be an issue if you’ve hired a qualified adjuster, contractor, or cabinet installer. The professional would only need to explore the market for new cabinets which are the same quality and condition as the ones you had. This is usually achieved by using estimating software based upon the dimensions of the cabinets. Then they would just use that value in order to determine the actual cash value or replacement cost value of your loss.


1Trinidad v. Florida Peninsula Ins. Co., 121 So.3d 433, 438 (Fla 2013).
2It will matter to an insurance company for the purposes of whether the damage is covered.
3Id. at 438 citing Black’s Law Dictionary 509, 1690 (9th ed. 2009).
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Mold Damage: Are You Covered?

Mold is one of the most stressful things you can find in your home. It is stinky, can cause major damage to your house’s structure, and can even threaten your health. Many people don’t think about the potential for mold until they’re confronted with it, but it’s a very real issue, especially here in Florida where water damage occurs so frequently from incidents like hurricanes.

Home insurance policies are often unclear as to what extent of mold coverage they provide. Sometimes mold damage is mentioned as an exclusion and sometimes it can only be covered as a part of a larger water damage claim.

In general you will find wording that states mold issues are only covered if they stem from an already-covered peril. So if mold appears as a result of a flood from a broken water heater, it would be covered, whereas if it simply begins appearing on the ceiling or develops after a small leak that you didn’t think was important, it wouldn’t.

You also must consider that repairing mold damage can be extremely expensive. It can cost fifteen- to thirty-thousand dollars to fix, while most homeowner’s policies cap how much they’ll cover at one- to ten-thousand.

When mold becomes an issue in your home, a basic homeowner’s insurance policy may simply not be enough. Since Florida is considered a mold-prone area, it is wise to look for an additional rider for this coverage. Unfortunately, because of our state’s propensity for mold, this rider can be more expensive here than it would be elsewhere.

Whether or not you have insurance for mold, it is best to do what you can to prevent this problem from ever occurring. We recommend:

  • Using a dehumidifier
  • Cleaning out your gutters frequently
  • Bleaching your bathroom frequently
  • Checking crawl spaces for dampness
  • Installing an exhaust fan in your bathroom and/or kitchen
  • Keeping your pipes and appliances in good condition
  • Avoiding letting water accumulate anywhere in your home
  • Avoiding installing carpets in damp rooms

If you encounter an issue with mold and need help filing a claim or determining whether or not your covered, the team at Watson, Espinal & Barnard, PLLC can help. We have extensive experience tackling insurance issues on behalf of our clients. We even offer a free consultation and a free on-site inspection to assess your damages. Contact us today!

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Appraisal Appeals FAQ

When you buy a homeowners insurance policy, you expect that if anything happens to your property, you will be compensated fairly by your insurance company. But sometimes the claim settlement that the company offers you falls radically short of what you were expecting and sometimes a claim that seems completely reasonable is denied. When these situations occur and you want to dispute what your insurance company says, it is sometimes possible to do so by way of appraisal.

What is an appraisal in the world of homeowners insurance?

As with appraisals for general real estate purposes, getting an appraisal as it relates to homeowners insurance is a process in which a third party with no stake in the situation determines the value of something.

Generally two competent, independent appraisers will look at the damage to your home and try to come to an agreement about how much you are owed.

Who picks the appraiser?

You pick one appraiser and the insurance company picks the other.

What if the appraisers cannot agree and reach a deadlock?

There will be another neutral third party, referred to as an umpire, who steps in to resolve any deadlocks between the two appraisers.

Who chooses the umpire?

The appraisers are tasked with choosing the umpire. If they cannot agree on an umpire, the choice may be made by a district court judge in the district where the loss happened.

What are the downsides of an appraisal?

An appraisal can only be useful in certain types of disputes. If you disagree about whether your insurance has to pay for the damage at all, or whether the type of damage is covered by your insurance, an appraisal won’t do much good. Appraisals can only determine the amount of loss.

Who can help me if I am dealing with property damage and insurance claims?

The team at Watson, Espinal & Barnard, PLLC is here to help you. We are passionate about helping clients better understand their insurance policies and guiding them in getting the settlement they deserve when their property has been damaged. If you or someone you know has a question or issue with their property insurance company or insurance claim, do not hesitate to contact us. We offer a free consultation and free on-site inspection to assess the damages to your property. You can reach us at (305) 665-0000. We look forward to partnering with you!

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Five Documents You’ll Need at Your Examination Under Oath

Whenever you file an insurance claim, your insurance company typically conducts an investigation. They do this for several reasons — to uncover fraud, but also to find ways they might be able to reduce the claim or deny it completely on a technicality. It’s also likely that part of their motivation is making the process more difficult so that their client is more likely to give up and take a loss.

Part of the insurance company’s investigation process is what’s called an “examination under oath.” This process is not common. If you’re being asked to sit for an examination under oath, your insurance company is having an issue with the documents you’ve provided or the facts and circumstances surrounding the claim. This is a formal contractual process where a representative of the insurance company asks you questions about the claim under oath. At Watson, Espinal & Barnard, PLLC., we have extensive experience helping clients get through their examinations under oath. Before every examination under oath, you will receive a letter from your insurance company or its attorney requesting you bring several different documents. These typically include:

1. Photos of damage

It is helpful to have photos of the damage for which you are making your claim. Having photos of the property before and after the damage occurred will assist your insurance company in completing its investigation.

2. Bank statements

You may be asked questions about some of the costs you expended around the time of the loss. Having bank statements to consult can help you answer such questions accurately. However, these bank statements should not just be handed over to your insurance carrier simply because they ask for them. Your financial situation is completely irrelevant as to whether or not your insurance claim is covered by your policy. When in the wrong hands, your financial situation can be used as a way for your insurance company to pressure you into an unfair settlement. We recommend that you consult with an attorney before handing over bank statements to your insurance company.

3. Records of previous insurance claims

You may be asked about past insurance claims, so it is useful to have the details of these on hand during your examination. Although this is a time to disclose past insurance claims or damages to your property, you should be careful to understand the difference between what was claimed and repaired on your past insurance claim and what is being claimed now. A cunning insurance company representative may attempt to confuse the issues and policy language in order to persuade you to withdraw your current or parts of your current claim. Again, we strongly recommend consulting with an attorney if you are asked to bring these documents.

4. Lease agreements

If you are making a claim for loss of rent or use, you may need to be able to demonstrate how much money you were receiving from rental payments before the damages occurred.

5. Anything else requested by the insurance company

The insurance company will provide you with a list of documentation that they want you to bring with you to your examination under oath. It may include the documents above and/or other documents. It’s important to follow their instructions in order to fulfill your duty to cooperate with the insurance claim. If you’re unsure what is relevant or truly required, you should immediately contact an attorney experienced with examination under oaths.

Who can help me prepare for my examination under oath?

At Watson, Espinal & Barnard, PLLC., we have extensive experience helping clients navigate insurance claims of all shapes and sizes, and achieve the highest possible compensation. If you’ve made or plan to make a claim, we can help. If you’re dealing with an insurance issue in South Florida, call us at (305) 665-0000 to schedule a free consultation. We can even offer a free on-site inspection to assess the damages to your property. We can’t wait to hear from you!

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