Unintended Consequences -2
Since Cheeks, the Insurance Services Office has placed definitions of actual cash value in the homeowners policy to define it as “replacement cost less physical depreciation.” Plaintiffs’ lawyers will argue that since the standard fire policy does not define the term the insurer cannot reduce the coverage by putting in a definition different than that imposed by the courts. Interestingly, when Mr. Cheeks’ claim was appraised a second time using the fair market value definition rather than replacement cost less depreciation, the award was approximately 50% less than the original award.
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