Policy Provisions, Coverage Analysis, and Claim Valuation for Property and Casualty Losses
Coverage analysis
First-party property claims are analyzed in order: declarations and limits, insuring agreement, exclusions, exceptions to exclusions, and conditions. The insured generally bears the burden of showing a direct physical loss from a covered peril; the insurer bears the burden of proving an exclusion. Where covered and excluded perils combine, causation matters: do not deny merely because an excluded peril contributed if the efficient proximate cause is covered. Read endorsements, deductibles, sublimits, and Colorado-specific policy requirements before estimating.
Valuation rules
- Replacement cost value (RCV) is the cost to repair or replace with like kind and quality, without depreciation. Actual cash value (ACV) is generally RCV less depreciation.
- Under an RCV policy, the insurer may pay ACV first and withhold recoverable depreciation until the insured repairs or replaces and submits proof, within the policy's time limits.
- The deductible applies once to the loss, not separately to ACV and depreciation. Commercial policies may also have coinsurance, margin clauses, or reporting conditions.
- Check ordinance or law, debris removal, business income, additional living expense, and matching provisions; these may have sublimits.
Worked example
A dwelling has RCV coverage, a $5,000 deductible, and hail damage estimated at $40,000 RCV with $10,000 depreciation. The initial ACV payment is ($40,000 - $10,000) - $5,000 = $25,000. After the insured completes repairs and documents the cost, the insurer may release the $10,000 recoverable depreciation, subject to the policy limit and time conditions. Total potential recovery is $35,000, not $40,000, because the deductible still applies. If the insured chooses not to repair, the withheld depreciation generally is not owed.
Traps
Do not subtract the deductible twice. Do not treat recoverable depreciation as automatic before repairs. Do not confuse market value with replacement cost. Do not ignore exclusions for wear, tear, faulty workmanship, or cosmetic damage, and do not assume matching is owed unless the policy or endorsement provides it.