Court Confirms Depreciation on Repair Costs Under ACV Policies
Monday, March 30th, 2026 Insurance Industry Legislation & Regulation Litigation PropertyThe Sixth Circuit’s decision in Schoening Investment LP v. Cincinnati Casualty Company clarifies a recurring dispute in commercial property claims: whether insurers may apply depreciation when paying repair costs under policies structured around Actual Cash Value (ACV).
The court held that when a policy explicitly ties repair-cost payments to a valuation provision defining ACV as replacement cost minus depreciation, insurers are permitted to deduct depreciation unless the insured completes repairs and satisfies conditions for replacement-cost coverage. The ruling reinforces that ‘cost of repair’ is not inherently depreciation-free and must be interpreted within the policy’s valuation framework.
For adjusters, the decision underscores the importance of policy structure and cross-references. The insurer in this case followed a common approach: issuing an ACV payment upfront and holding back depreciation until repairs are completed. The court validated this workflow, emphasizing that optional replacement-cost coverage operates as a conditional benefit, not an automatic entitlement.
The ruling also addresses litigation trends, particularly class actions alleging improper depreciation. The court’s reasoning shows that such claims face significant hurdles when policy language clearly defines ACV and ties repair valuation to it. Adjusters should expect increased scrutiny of policy wording in disputes but can rely on this decision as support when applying depreciation consistently with contract terms.
Another key takeaway is procedural. The insured’s failure to raise ambiguity arguments at the trial level resulted in forfeiture on appeal. This highlights the importance of early issue framing in coverage disputes, which can directly impact claims litigation outcomes.
