Ch 6 · Reading the Carrier's Estimate
Module 6.4
Improper Depreciation
4 ways carriers wrongly depreciate. Labor depreciation fight. Useful-life table. The 180-day deadline.
12 min read
What you'll learn
The 4 ways carriers wrongly apply depreciation to shrink your ACV check. The "labor depreciation" fight (FL law). How to challenge each one.
6.4.1 Quick depreciation refresher
(Full module: 2.5 — ACV vs RCV)
| Term | Meaning |
|---|---|
| RCV | Cost to replace new — no depreciation |
| Depreciation | Reduction for age, wear, condition |
| ACV | RCV minus depreciation |
On a Replacement Cost policy, depreciation is withheld initially and recoverable when you complete + document repairs.
The carrier's depreciation calculation matters because:
- Lower ACV check upfront (cash flow problem)
- If you don't complete repairs, depreciation is forfeited
6.4.2 The 4 improper depreciation tactics
Tactic 1 — Depreciating labor
The fight: can carriers depreciate labor (not just materials)?
FL legal landscape: evolving. Florida case law has gone back and forth on this. Some carriers depreciate labor; some don't. Sancho v. State Farm and other cases have shaped the rule.
Current general rule (verify): in most cases, depreciation should apply to materials, not labor. There's no "old labor"; labor cost is current at time of repair.
Check your policy: specific language may control. Carriers who explicitly allow labor depreciation in policy text have better grounds.
Practical: if carrier depreciated labor on your estimate and policy doesn't expressly allow it → rebuttal point. Get attorney review for higher-stakes claims.
Tactic 2 — Excessive useful life
Carrier claims a 25-year asphalt shingle roof has 50-year useful life → halves your loss.
Counter:
- Manufacturer's warranty + spec sheets
- NAHB (National Association of Home Builders) or similar industry useful-life tables
- Independent contractor opinion on actual useful life
- Comparable claims w/ different useful-life applied
Tactic 3 — Compounding depreciation
Same item depreciated twice — once for age, again for "condition."
| Item | Carrier calc | Why it's wrong |
|---|---|---|
| 10-yr roof, 25-yr life | 40% (age) + 20% (condition) = 60% depreciated | Condition is part of useful-life calc; shouldn't be added on top |
Spot it: any line w/ depreciation > 50% on materials < 15 years old is suspect. Demand the calculation methodology.
Tactic 4 — Depreciating non-depreciable items
Some line items shouldn't be depreciated at all:
| Item | Why not depreciable |
|---|---|
| Mitigation costs (tarp, drying, extraction) | Current-cost services, not deteriorating assets |
| Removal/disposal | Current labor cost |
| Code-required upgrades | Paid under O&L; new construction |
| Some labor (per FL law for many policies) | No "old labor" |
| Permits + inspection fees | Current services |
If carrier applied depreciation to any of these → rebuttal.
6.4.3 The depreciation worksheet
Carrier should provide a depreciation calculation worksheet showing:
| Item | RCV | Useful Life (yrs) | Age (yrs) | Depreciation % | $ Depreciated | ACV |
|---|---|---|---|---|---|---|
| Roof shingles | $20,000 | 25 | 10 | 40% | $8,000 | $12,000 |
| HVAC | $5,000 | 18 | 12 | 67% | $3,350 | $1,650 |
| Carpet | $3,000 | 10 | 4 | 40% | $1,200 | $1,800 |
If you don't have this worksheet — request it. The carrier owes transparency on their depreciation logic.
What to verify
| Field | Check |
|---|---|
| RCV | Match carrier's estimate? |
| Useful life | Industry standard? Manufacturer warranty? |
| Age | Verify w/ home records, original construction docs |
| Depreciation % | Math: Age / Useful Life × 100 (typically) |
| $ Depreciated | RCV × Depreciation % |
| ACV | RCV - $ Depreciated |
Mistakes here are common. Catch them.
6.4.4 Useful life table — common items
A reference for what's reasonable:
| Item | Typical useful life |
|---|---|
| Asphalt shingle roof (3-tab) | 20 yrs |
| Asphalt shingle roof (architectural) | 25-30 yrs |
| Tile roof (concrete or clay) | 50+ yrs |
| Metal roof | 40-70 yrs |
| Drywall | 50+ yrs |
| Paint | 7-10 yrs |
| Carpet | 8-10 yrs |
| Hardwood floor | 25-50 yrs |
| Tile flooring | 25-50 yrs |
| Vinyl flooring | 10-15 yrs |
| Cabinets | 25-50 yrs |
| Countertops (laminate) | 10-15 yrs |
| Countertops (granite/quartz) | 25-50 yrs |
| HVAC system | 15-20 yrs |
| Water heater | 8-12 yrs |
| Appliances (general) | 10-15 yrs |
| Light fixtures | 15-25 yrs |
| Ceiling fans | 10-15 yrs |
| Smoke detectors | 10 yrs |
| Insulation | 50+ yrs |
| Windows (vinyl) | 20-30 yrs |
| Windows (impact) | 25+ yrs |
| Plumbing fixtures | 15-25 yrs |
If carrier's useful life on a specific item is materially shorter than this → challenge.
6.4.5 The depreciation rebuttal
For each improperly depreciated line:
Line: Roof — asphalt architectural shingles
RCV: $22,000
Carrier depreciation: 60% = $13,200
Carrier ACV: $8,800
Issue: Carrier applied 60% depreciation. Calculation logic:
- Carrier claims useful life: 25 years
- Roof age: 12 years
- Carrier formula: 12/25 = 48%, then "+ condition adjustment" = 60%
Rebuttal:
- "Condition adjustment" is double-counting; condition is reflected
in useful life, not on top of it
- Roof in good pre-loss condition (photos attached, Exhibit A)
- Reasonable depreciation: 12/25 = 48% = $10,560
- Reasonable ACV: $11,440
Difference: $2,640
Supporting documentation:
- Manufacturer spec sheet showing 30-yr warranty (Exhibit B)
- Pre-loss roof condition photos (Exhibit A)
- Independent contractor opinion on useful life (Exhibit C)
Repeat for each line. Sum the differences. That's your depreciation rebuttal.
6.4.6 The 180-day deadline (recovering depreciation)
Reminder: after ACV is paid, you have a window to recover the depreciation by completing repairs + documenting.
Most FL policies: 180 days from ACV payment to complete repairs and submit documentation. Some allow extensions for cause.
Calendar this deadline. Many homeowners forget.
Documentation typically required to release recoverable depreciation:
- Contractor invoices
- Lien waivers
- Photos of completed work
- Sometimes: signed contractor certification
Submit + follow up. Carriers don't always release automatically.
6.4.7 Common depreciation disputes + counters
"Our depreciation is standard."
Counter: provide policy language requiring "reasonable" depreciation. Show industry-standard useful-life table. Show carrier's number deviates.
"Your policy expressly allows labor depreciation."
Counter: read the actual policy language. Ambiguity in the carrier's favor is unusual; check case law.
"We can't calculate condition without an inspection."
Counter: carrier already inspected. Pre-loss photos show condition. Independent expert opinion on condition.
"You're confusing market value with replacement cost."
Counter: not the issue. Depreciation reduces RCV to ACV. Market value is irrelevant.
6.4.8 Action steps
- Request the depreciation worksheet if not provided.
- Verify each line's age, useful life, and depreciation %.
- Cross-check useful lives against the table in 6.4.4.
- Identify any labor depreciation — review policy + FL law.
- Identify any non-depreciable items that were depreciated.
- Build the depreciation rebuttal as a separate supplement to the scope + pricing rebuttals.
Next: 6.5 Overhead and Profit (O&P) — The Three Trades Rule.
Educational. Not legal advice. FL case law on labor depreciation continues to evolve. Specific policy language controls. Verify against current Florida case law and your specific policy before relying on any depreciation argument.