Nineteen-Year Roof, Recoverable Depreciation, and a Tear-Off Ordinance
A hail claim on an HO-3 policy. The dwelling limit is $320,000. The replacement cost of the damaged roof is $24,500; depreciation is 40%; the deductible is $2,500. The policy provides replacement cost on the dwelling and a 10% ordinance or law limit. The roof has two layers of shingles, and the local code requires tear-off of both layers before replacement. The tear-off adds $3,500 and is not included in the $24,500 RCV estimate. The insurer issues an ACV payment of $12,200 and tells the homeowner that the rest is "recoverable depreciation" after repairs. The homeowner wants to replace the roof with architectural shingles costing $6,000 more and asks the adjuster to include that upgrade, plus replace the undamaged front gutter so the house will match.
1. Check the insurer's $12,200 initial payment. Show your math and identify any errors.
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RCV is $24,500. Depreciation at 40% is $9,800. ACV is $24,500 minus $9,800, or $14,700. Apply the $2,500 deductible: $14,700 minus $2,500 equals $12,200. The initial payment is arithmetically correct if the policy is replacement cost and the deductible applies once to the loss. But confirm whether the deductible is a flat $2,500 or a percentage; confirm that the $24,500 includes all damaged components such as ridge, vents, flashing, permits, and dump fees. The $3,500 tear-off is not in the RCV estimate, so the initial payment does not include it. Also confirm whether the policy has a roof-specific actual cash value endorsement or age limitation; at 19 years, a standard HO-3 should still pay replacement cost, but the endorsement controls.
2. Explain recoverable depreciation and what the homeowner must do to collect the remaining $9,800.
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Recoverable depreciation is withheld until the insured actually repairs or replaces the damaged property and incurs the cost. The homeowner must complete the work, submit paid invoices, contracts, receipts, and photos, and show that the cost equals or exceeds the RCV figure. The insurer then releases the withheld depreciation, up to the amount actually spent and the policy limit. If the homeowner spends less than $24,500, the insurer pays only the actual cost less deductible. If more is spent because of covered code items, only those covered items are added. The homeowner should not expect the depreciation before work is done, and should not sign a release for the withheld amount without documenting completion. A public adjuster should prepare a completion package and reconcile the final payment.
3. Analyze the $3,500 tear-off, the $6,000 architectural shingle upgrade, and the undamaged front gutter.
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Tear-off: local code requires removing two layers before replacement. The base policy may exclude code-required costs, but the 10% ordinance or law limit provides up to $32,000 (10% of $320,000). If the tear-off is required by code and not already included in the RCV estimate, it is likely payable under that coverage, subject to the limit and documentation from the code official. Architectural shingles: the policy owes like kind and quality, not a betterment. If the existing roof was 3-tab and the upgrade costs $6,000 more, that difference is not covered; the insurer pays the cost of comparable shingles. Front gutter: if it was not damaged by hail and is only being replaced for cosmetic matching, coverage is weaker. The adjuster can argue that a repair to the roof will create a visible mismatch, but most HO-3 forms do not require matching of undamaged components unless the policy language says so; negotiate a reasonable match only if the policy supports it.