 |
One of the first things we are taught in the insurance business is the two basic valuation methods to insure property - Replacement Cost or Actual Cash Value. Students being taught the "art" of insurance are always asked to define both.
Replacement Cost is defined as the cost "to repair or replace damaged property with like kind and quality." The age-old principle of property insurance in this vein is to make someone whole as they were a moment before the loss (example: fire).
Actual Cash Value on the other hand is defined in insurance terms as Replacement Cost less depreciation. Adjusters establish the Replacement Cost of a structure, for example, and then apply depreciation based upon standards in the industry.
It is important to note here that in the event of a total loss to a structure, for example, the insurer will pay Actual Cash Value until the structure is replaced. At that point the full Replacement Cost payment will be made. If the owner of a building would not replace that structure in the event of a total loss then Actual Cash Value is obviously a better option.
Earlier in this millennium, to the surprise of many of us in the industry, the historical definition of Actual Cash Value changed for the insurance industry in California. A structure that is insured on an Actual Cash Value basis and sustains a total loss is adjusted using an "Actual Cash Value" premise of "fair market value."
This has been problematic to say the least. An insurance policy does not insure the dirt under the structure. We are concerned only with the cost to rebuild the structure (Replacement Cost) or determine the Actual Cash Value of the structure itself prior to loss.
"Fair Market Value" is something totally different and can vary depending on many factors (location, surrounding, market conditions, etc.). A client of mine owned a 1200 square foot rental dwelling in one of our rural communities. We insured the structure on an Actual Cash Value basis for $70,000 - assuming about 40 percent depreciation off a Replacement Cost Value of $120,000 ($100 Per Square Foot).
The structure unfortunately sustained a total loss by fire. The adjuster went to real estate comparable listings and determined the "Fair Market Value" of the home to be $75,000 - less $30,000 for the land and paid $45,000 on the claim. To my thinking (and my client's), in this instance "fair market value" had no correlation to the Actual Cash Value.
Assemblyman Tom Daly (D - Anaheim) has proposed AB 1740, which will be heard in 2018 and intends to address the Fair Market Value vs. Actual Cash Value dispute. The bill provides that the Actual Cash Value in a total loss "be the amount it would cost the insured to repair, rebuild or replace what was lost less a fair and reasonable deduction for physical depreciation."
Here's hoping this bill brings the definition of Actual Cash Value back to where we started.
Brent Swanson
President / Chief Operating Officer
|
|
We love to support our community!
Below are some upcoming events BMI has sponsored:
- January 26, 2018 - Tulare Chamber of Commerce 134th Annual Awards & Installation Banquet
- February 1, 2018 - Redwood High School Spring Production
- February 27, 2018 - Tulare County ACSA Annual Conference: "Your Mathematical Heartprint: Sustaining Student Effort and Perseverance Every Day!"
|
|
|
|
Our Office will be closed on the following upcoming dates:
- January 15, 2018
- February 19, 2018
In addition we will be closing early on Friday, March 30, 2018.
|
|
|
|
Property and Casualty Trends
|
|
Directors' & Officers' Insurance: What Is It? Who Needs It?
In today's business climate of corporate transparency and accountability, an organization's officers and directors face a myriad of employment-related exposures. Sarbanes-Oxley regulatory mandates and shareholder activism mean directors are more frequently at risk, translating to rising claims and escalating settlement costs.
In the wake of unprecedented corporate scandals in recent years, clearly the trend of corporate accountability applies to large corporations. But privately held companies, including nonprofits, are not exempt from litigation arising out of the management decisions of their boards. They, too, are at risk.
Regardless of your company's size, the legal cost to defend a director is substantial, as are the potential personal penalties...
|
|
|
|
Life & Health Insurance Updates
|
|
Individual Mandate Penalty will be Eliminated in 2019
OVERVIEW:
On Dec. 22, 2017, President Donald Trump signed into law the tax reform bill, called the
Tax Cuts and Jobs Act, after it passed both the U.S. Senate and the U.S. House of Representatives.
This tax reform bill makes significant changes to the federal tax code. The bill does not impact the majority of the Affordable Care Act (ACA) tax provisions. However, it does reduce the ACA's individual shared responsibility (or individual mandate) penalty to zero, beginning effective 2019.
As a result, beginning in 2019, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage.
|
|
New 1-9 and W-2 Scams
By Jeff Schanenbacher
Beware: Scammers are getting more sophisticated and posing as Federal officials to steal confidential information. I-9 Scam Employers are receiving emails from a sender claiming to be US Citizenship and Immigration Services and requesting information from the I-9 form. Normally, employers do not share or send this information in to the USCIS. However, the emails look very authentic even using correct emails with .gov and labels from both the USCIS and the Office of Inspector General. It will have your company address and other information.
DO NOT CLICK ON ANY OF THE LINKS!! The USCIS has stated that their agency is not sending out any inquiries for information in this manner. Instead, forward these emails to the Federal Trade Commission at [email protected]
Please click here to continue reading the article.
Visit www.hrmobileservices.com for more helpful information.
|
We thought we'd start off this year with a quick brief of what to expect from a regulatory perspective: we'll return to our articles that speak about safety and how it works in February.
This year, the big impact for us will likely be the development of a new regulation for Indoor Heat Illness. The current standard on heat illness applies to outdoor places of work only (it is stated explicitly in the code). Indoor heat illness violations and citations have been based upon the hazard identification and control part of the Injury & Illness Prevention Program (IIPP).
Please click here to continue reading the article.
Visit www.borettinc.com for more helpful information.
|
|
A Word from Workers' Comp Department
|
Buckman Mitchell, Inc./HR Mobile Services, Inc. Event
New Year, New Laws
We will be covering new laws, legislations and updates to regulations for 2018 and beyond.
January 17, 2018 -
click here for event registration form.
Buckman Mitchell, Inc./Boretti, Inc. Event
Cal/OSHA Update: Be Prepared!
Learn what Cal/OSHA is looking for, common violations, and what happened in 2017 that affects you, and what's new for 2018.
February 6, 2018 -
click here for event registration form.
|
How to Protect Your Home From Mudslides
Mudslides cause millions of dollars in damage every year. Not only do they threaten unsuspecting drivers by wiping out roads, but they also destroy homes and can leave trails of destruction miles wide. If you live in an area prone to mudslides, there are a few preventative measures you can take to protect your home and family from this devastating force of nature.
Please
click here
to continue reading the article.
|
|
Fire Safety During Winter Storms
Winter storms can happen almost anywhere. They can cause us problems. Know what to do before, during and after a storm. This will help keep you and your family safe from a winter fire.
IMPORTANT REMINDER
There are more home fires in winter than in any other season. Half of all home heating fires happen in December, January, and February.
As you stay cozy and warm this winter season, be fire smart!
Please click here for important tips on winter fire safety.
|
|
|
|
January Employee Spotlight
|
|
January's spotlight is on Michelle Adamson
Department and position:
Commercial Lines, Senior Account Manager
When did you join the BMI team?
February 1996
What is the best part about working at Buckman Mitchell, Inc.? I love working at BMI! They have supported me as I have grown in my insurance career, starting out as the office typist and now Commercial Lines Senior Account Manager working with our CEO -Clifford H, Dunbar, CIC. I could not have done it without working for an employer that offers such great support and encouragement. They are also family and community oriented which is very important to me. Both the Board and the staff supported me during my father's illness and passing and have done the same for many of my fellow co-workers dealing with similar situations. Last year BMI and our employees raised over $17,000 to support many different local non-profit and community outreach programs.
What is your favorite thing to do in your free time? In my free time I keep busy with my husband Eric and our 3 sons - Ian (17), Ethan (15), and Aaron (11) and their many activities - Boy Scouts, Baseball, Basketball, PTA, etc.
|
|
|
|
|
|
