Fifth Circuit Finds Labor Not Included in Actual Cash Value Due to Ambiguous Policy Language

In contrast to a recent North Carolina case, the Fifth Circuit Court of Appeals' decision in Lorine Mitchell v. State Farm Fire; Casualty Company finds ‘Actual Cash Value’ does not include depreciation of labor. Mitchell, whose home was damaged in a 2017 storm, made a claim under her State Farm policy. State Farm paid the ‘Actual Cash Value’ of the repairs minus depreciation of both material and labor. Michell claims labor should not have been depreciated. The term ‘Actual Cash Value’ was not defined in the policy, which the court determined made it ambiguous. According to Mississippi law, ambiguous insurance policies must be resolved in favor of the insured, thus Mitchell’s interpretation, which is considered reasonable by the court, stands. Read the full case here: