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   Depeciation of Labor
P:  1/1/2010 9:23:54 AM
arteradjusting32408

Member

Total Posts: 1
Last Post: 1/1/2010
Member Since: 10/18/2007

I'd like to know from property adjusters if depreciation is typically applied to the labor portion of repair for a large farm implement ?

 


Revisions : 0   |    Posted:  1/1/2010 9:23:54 AM   |   IP:  Recorded    |    Report this post


 There are 4 replies to this message.  There are 4 replies on this page.

P: 1/19/2010 10:15:47 AM
jthoey2

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Total Posts: 2
Last Post: 2/1/2010
Member Since: 1/19/2010

I am not a property adjuster but I have never seen depreciation applied to labor rates.

Jim Hoey

Revisions : 0   |    Posted:  1/19/2010 10:15:47 AM    |    IP:  Recorded    |    Report this post
P: 1/19/2010 3:21:30 PM
TRon

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Total Posts: 283
Last Post: 7/6/2012
Member Since: 9/30/2006

I am not sure what application you refer to, however, one way to help an insured in an HVAC claim is as follows:

3 Ton Compresser Replacement        $950.00
 
Cost of Compresser                           $450.00
Less 50% depreciation                     -$225.00
ACV                                                   $225.00
Labor to replace                                $500.00
Total ACV Claim                                 $775.00
 
The above application is better than:
 
3 Ton Compresser Replacement        $950.00
Less 50% deprecciation                   -$475.00
ACV Claim                                         $475.00

I Post Large, it is easy on old eyes!!

Revisions : 0   |    Posted:  1/19/2010 3:21:30 PM    |    IP:  Recorded    |    Report this post
P: 1/20/2010 7:16:22 PM
Kevin Hromas

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Total Posts: 79
Last Post: 12/15/2010
Member Since: 10/18/2007

  The proper application of depreciation is one of the most misunderstood and therefore misapplied aspects of determining the ACV of a covered insurance claim.

While it is true that LABOR, in and of itself, does not depreciate, that principle applies to functions that are truly LABOR ONLY. Cleaning, moving contents, demolition, etc.

When an item is part and parcel of a larger function such as a part of a piece of farm equipment, or a compressor as part of an AC unit, there was labor involved in the original manufacturing or construction of that item.  Applying depreciation to the LABOR portion of the repair, along with the physical components, is a proper determination of the recoverable ACV amount payable under the insurance contract.

 

Kevin Hromas JD, RPA, PLCS
EGA Houston, TX

Kevin Hromas - JD,EGA,RPA,PLCS,WIND Umpire
Houston, TX

www.KevinHromas.com

Revisions : 0   |    Posted:  1/20/2010 7:16:22 PM    |    IP:  Recorded    |    Report this post
P: 2/3/2010 9:59:37 PM
misterC

Member

Total Posts: 22
Last Post: 5/29/2010
Member Since: 4/9/2008

Kevin, I know you are a very smart and experienced adjuster, but with all due respect you need to qualify your answer.

Your logic would be impeccable for a Texas court, but California appellate judges laughed and made jokes about similar reasoning.

This is just another of those questions that are state specific.

In California it is against the (case) law to apply depreciation to labor.

The correct answer to the farm implement question is: "It depends- what state are you in?"

Revisions : 0   |    Posted:  2/3/2010 9:59:37 PM    |    IP:  Recorded    |    Report this post

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