Damage Evaluation
What this domain tests
Turning damage into a defensible dollar figure: valuation methods, depreciation, matching, and special categories of loss.
Measures of loss
- Replacement cost value is the cost to repair or replace with like kind and quality today, without depreciation.
- Actual cash value is replacement cost less depreciation: physical deterioration, functional obsolescence, and economic obsolescence. ACV is not market value.
- Betterment and matching: replacing undamaged material to achieve a reasonable match may be owed where the mismatch is unreasonable. Pair-and-set treatment applies to items that lose value when separated.
- Specialty property: fair market value or appraised value for antiques, fine art, and jewelry, subject to scheduled or unscheduled limits.
- Time-element loss: business income measured over the period of restoration (net income plus continuing expenses), extra expense, and additional living expense for dwellings.
- Add-ons: debris removal, code upgrades, pollutant cleanup, and professional fees.
Worked example
A ten-year-old shingle roof with a 25-year life and a $24,000 replacement cost is damaged on one slope. Physical depreciation = 10/25 x $24,000 = $9,600, so ACV is $14,400 before the deductible. If matching shingles are discontinued, the scope may extend to the slopes needed for a reasonable match, and the withheld depreciation is recovered on completion. Depreciation follows effective age and useful life; matching is a scope question, not a coverage question.
Traps that cost marks
- Depreciating labor along with materials without support.
- Applying a percentage depreciation with no documented useful life.
- Ignoring obsolescence that reduces replacement cost.
- Counting contents and structure twice.
- Treating recoverable depreciation as a new claim instead of a second payment.