Tennessee Supreme Court Rules Insurance Companies Cannot Depreciate Labor Costs in Insurance Payments for Property Damage

Nashville, Tenn. – The Tennessee Supreme Court addressed a certified question from the United States District Court for the Middle District of Tennessee regarding whether an insurance company can depreciate the cost of labor when calculating actual cash value payments for property damage claims. 

The homeowners in this case had home insurance policies with Auto-Owners (Mutual) Insurance Company and suffered damage to their properties.  Under both of the policies presented in the lawsuit, the insurance company calculated the actual cash value of the damaged property by first calculating the replacement cost of the damaged property and then adjusting that number by depreciating both labor and material costs.  The homeowners filed suit and argued that the insurance company’s practice of depreciating labor costs was a breach of their contracts.  The insurance company countered that labor costs are depreciable under the terms of the policies. 

The Supreme Court determined that the language of the policies was ambiguous, that is, susceptible to two or more reasonable interpretations, regarding whether labor costs could be depreciated.  Under Tennessee law, when an insurance policy is ambiguous, the policy is construed against the insurance company as the author of the policy.  Consequently, the ambiguous policy language in this case had to be interpreted in favor of the homeowners, meaning that labor costs could not be depreciated when calculating actual cash value.

To read the unanimous opinion in Lammert, et al. v. Auto-Owners (Mutual) Insurance Company, authored by Justice Roger A. Page, go to the opinions section of TNCourts.gov.

About Brad Jones

Brad is the Owner/Operator of BBB TV 12, and has been with the company since August of 1996. Brad is a 1987 graduate of Coalfield High School and a 1995 graduate of the University of Tennessee College of Communications. He won the 1995 broadcast production student of the year award. Brad worked at Shop at Home, Inc. a home shopping network that was located in Knoxville, TN from 1993 - 1995 and then at Via TV (RSTV, Inc.) from 1995 - 1996. After some freelance work in Nashville, Brad joined the BBB Communications staff in August of 1996. A short stint at WVLT TV as a news photographer was in 2001, but he continued to work at BBB TV as well. Brad is married to Nicole Jenkins Jones, a 1990 graduate of Oak Ridge High School, who works at Oak Ridge Gastroenterology and Associates in Oak Ridge. They have 3 kids, Trevor Bogard, 27, Chandler 22, and Naomi 13. On December 12, 2013 they welcomed their first grandchild, Carter Ryan Bogard. Brad is also the assistant boys basketball coach at Coalfield High School for the past 11 years. In 2013-14 the Yellow Jackets won their first district title since 1991 and just the 4th in school history.

Check Also

The Kingston Police Department Joins Statewide “Click It or Ticket” Campaign

As summer begins and families set out on vacations, the Kingston Police Department is teaming …

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.