Lammert v. Auto-Owners (Mutual) Insurance Co.

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In this case in which the district court certified a question of law to the Supreme Court regarding the interpretation of two insurance policies the Supreme Court answered that, under Tennessee law and based on the language in the policies at issue, the insurer, in making an actual cash value payment, may not withhold a portion of repair labor as depreciation. The policy defined actual cash value as "the cost to replace damaged property with new property of similar quality and features reduced by the amount of depreciation applicable to the damaged property immediately prior to the loss" and stated that "actual cash value includes a deduction for depreciation." The Supreme Court held (1) the language in the policies was ambiguous and must be construed in favor of the insured parties; and (2) therefore, labor may not be depreciated when the insurance company calculates the actual cash value of a property using the "replacement cost less depreciation" method. View "Lammert v. Auto-Owners (Mutual) Insurance Co." on Justia Law