On Apr. 17, MD INS proposed bulletin re claims on cash value basis.
MD INS proposed Bulletin 25-XX which clarifies that property insurers may not depreciate labor costs when settling claims on an actual cash value (ACV) basis.
Settled Labor Costs
Cost of repairing/replacing damaged property calculated as sum of materials and labor.
When settling property loss claim on ACV, insurer calculates and deducts depreciation to reflect actual property value based on physical condition at time of the covered loss.
Labor costs may not be depreciated when settling property loss claim on an ACV basis.
Therefore, depreciation of labor costs, committed in a way to indicate general business practice, constitutes an unfair claim settlement practice in violation of MD INS 27.
Comments
Comments on draft bulletin must be submitted no later than May 19, 2025.
