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