In the recent decision Marquez v. Clear Blue Specialty Insurance Company, No. 6:23-cv-2025-ACC-DCI, 2024 U.S. Dist. LEXIS 219390 (M.D. Fla. Dec. 4, 2024), the U.S. District Court for the Middle District of Florida granted the insurer’s motion in limine and excluded evidence and testimony regarding replacement cost value of damages, matching, and to limit damages to direct physical loss.
Background:
Plaintiffs, Luz Marquez and Gilberto Santiago (“Plaintiffs”), sued Clear Blue Specialty Insurance Company (“Clear Blue”) for denial of coverage under their homeowners policy (the “Policy”) for damage to their home allegedly caused by Hurricane Ian. The Policy contained a provision that stated that “[Clear Blue] will pay no more than the actual cash value of the damage until actual repair or replacement is complete…” Clear Blue asserted that the Plaintiffs had not repaired or replaced the damaged property and they could only potentially recover actual cash value based on the language of the Policy and pursuant to Florida Statute § 627.7011(3)(a), which provides that in the event of a loss for which a dwelling or personal property is insured on the basis of replacement costs, the insurer must initially pay at least the actual cash value of the insured loss, less any applicable deductible.
Actual Cash Value v. Replacement Cost Value:
In order to understand Clear Blue’s arguments, it is important to discuss the difference between actual cash value (“ACV”) and replacement cost value (“RCV”).
The actual cash value of the direct physical loss is generally defined as “fair market value” or “[r]eplacement cost minus normal depreciation,” where depreciation is defined as a “decline in an asset’s value because of use, wear, obsolescence, or age”; thus, the difference between ACV and RCV is that depreciation is withheld from ACV. Goff v. State Farm Florida Ins. Co., 999 So. 2d 684, 690 (Fla. 2d DCA 2008).
The Federal Decision:
Clear Blue filed a motion in limine to exclude evidence and argument related to the RCV calculation of damages and matching damages, and to restrict evidence to only items that sustained physical loss. Clear Blue argued that because Plaintiffs were not entitled in this case to payment for repairs or matching costs they had not yet incurred, evidence or testimony regarding those matters must be excluded at trial. Clear Blue also argued that the value of non-damaged items was irrelevant to the actual cash value determination and did not cover contingent future mismatch, or advanced payments for repairs.
The Court granted Clear Blue’s motion in limine and held that Clear Blue was obligated to “pay no more than the actual cash value of the damage until actual repair or replacement is complete” and excluded evidence arguments related to replacement cost value.
Legal Implications:
This decision is important because in cases where an insured/plaintiff does not have any evidence of repairing or replacing damaged property, insurance carriers can exclude any replacement cost evidence from trial which can further limit the amount that an insured/plaintiff can recover.
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