Superior Court upholds CDI homeowner protections

February 25, 2007

Insurers may not depreciate the cost of labor when paying on homeowners’ insurance claims, the California Superior Court has ruled. Previously, that practice by insurers forced homeowners to makeup the difference and increased their out-of-pocket expenses to repair damage to their homes. But the court decided in the California Department of Insurance’s favor, and upheld the protections for homeowners filing claims.

The ruling was made in response to a 2003 lawsuit filed by insurance trade organizations which challenged CDI’s amendments to the Fair Claims Settlement Practice Regulations. CDI said its amendments increased protection to consumers and set more stringent standards for insurers. All but the “depreciating labor” issue were settled through negotiations.

At issue was whether labor costs could be depreciated. The Court ruling upheld CDI’s view that unlike physical property, labor does not lose value through the passage of time, and therefore can not be depreciated.

“This is good news for California homeowners,” said Insurance Commissioner Steve Poizner. “When you pay for homeowners’ policy and file a claim, you should get the coverage you pay for. We were confident the court would agree.” Whether you are installing new replacement carpet or old replacement carpet, the cost of installing it would be the same, CDI indicated.

Topics California Homeowners

Was this article valuable?

Here are more articles you may enjoy.

From This Issue

Insurance Journal Magazine February 26, 2007
February 26, 2007
Insurance Journal Magazine

Directors & Officers/Executive Liability; Hospitality Risks Directory; 4th Qtr Market Survey