Fire Loss: ACV, Depreciation Holdback, Matching Siding, and Code Upgrades
A kitchen fire damages cabinets, ceiling, and roof framing in a 1952 home. The dwelling limit is $350,000 on a replacement-cost basis. The policy pays actual cash value first and holds back depreciation until repairs are complete. The public adjuster's estimate shows $28,000 replacement cost for the roof with 25% depreciation, $65,000 for the kitchen with 20% depreciation, and $12,000 for the damaged rear siding with 20% depreciation. The rear siding is discontinued; the insured demands replacement of all four elevations at $46,000 so the house will match. The city requires $8,000 of electrical code upgrades when the kitchen is rebuilt. The insurer's initial offer is $71,000 actual cash value, with no code item and no siding beyond the damaged elevation.
1. Calculate the initial ACV payment and depreciation holdback from the adjuster's estimate, ignoring the insurer's offer.
Read the worked answer
The adjuster's own numbers produce: roof $28,000 − 25% ($7,000) = $21,000 ACV; kitchen $65,000 − 20% ($13,000) = $52,000 ACV; siding $12,000 − 20% ($2,400) = $9,600 ACV. Total RCV is $105,000; total depreciation is $22,400; initial ACV is $82,600. The insurer's $71,000 offer is $11,600 below the adjuster's ACV calculation before code items. The adjuster should demand the insurer's depreciation worksheet, line-item pricing, and explanation for the difference. The $8,000 electrical code item should be analyzed separately under ordinance-or-law coverage, not buried in the ACV demand.
2. Is the insured entitled to replace all four elevations of siding to match? Explain matching and betterment.
Read the worked answer
Matching is a coverage question, not an automatic right. If the rear siding is discontinued and a reasonable match cannot be achieved, the policy may require replacing enough undamaged siding to produce a uniform appearance. The adjuster should obtain the manufacturer's discontinuation letter, a siding contractor's written opinion, and photos showing the mismatch. The insured is not automatically entitled to all four elevations at $46,000; the measure is the cost to restore the damaged property to a pre-loss condition, not to improve the whole house. The adjuster should demand the cost of the damaged elevation plus any required matching, and document why additional elevations are necessary.
3. How should the $8,000 electrical code upgrade be treated?
Read the worked answer
Ordinance-or-law coverage is separate from the dwelling limit and applies only if the policy includes it. The adjuster should check the declarations and endorsements for a 10% or similar ordinance-or-law limit. If coverage exists, the $8,000 electrical upgrade is payable when the city code citation is provided and the work is actually required. If the policy excludes ordinance-or-law, the adjuster should tell the insured the item is not covered and cannot be added to the building claim. The adjuster should not present the item as part of the initial ACV unless the endorsement is confirmed.