The insured has a homeowner policy with some unique language. In regard to recovery of withheld depreciation, the policy requires the insured complete replacement within one year of the Actual Cash Value ("ACV") Payment. Actual Cash Value is a defined term in the policy. It is defined, in pertinent part, as the "amount it would cost to repair or replace covered property, at the time of the loss or damage, with materials of like kind and quality, subject to deduction for depreciation . . .." The Carrier calculated the "one year" time limit from the date the carrier issued its first advance, calling it an ACV payment. However, after continued negotiations with the insurance company, it made a substantial additional payment (not replacement cost) over 7 months later. There was a final ACV payment issued 5 months after that, for a total of 11 months after the first payment.

It is the carrier's position that the first payment constituted its ACV payment and started the one-year clock ticking. By definition, the first payment could only have been a merit payment and not an ACV payment. Since the definition of ACV includes a determination of the cost to repair or replace the property, and at the time the first payment was issued, an accurate determination of the cost to replace and, by extension, the ACV, had not yet been identified. That did not happen for an additional 11 months. It would seem the purpose of the one-year limit is to give the insured one year to complete repairs, from the time that there is not only an agreed cost of repair, but the ACV payment for the agreed cost of repair has been issued. Prior to having an agreed cost of repairs, it is unreasonable to expect an insured to start repairs since they have no agreement on the amount they will be reimbursed. Yet, in this case, the carrier started the clock based on the date it issued its incorrect ACV (i.e. merit) payment, which was of no use to the insured as the amount was incorrect, as acknowledged by the carrier through its additional payments that were issued on an ACV basis.

It is our position that, based on a clear reading of the policy, the one-year time period cannot start to be calculated until after a final, agreed, ACV payment, as defined in the policy, is issued.