Third Party Liability Claimant (Reader Question Regarding Depreciation in Insurance Claim)

by R. Lieberman
(Montgomery, AL)

An 18 wheeler hit and destroyed a drive-thru overhang @ our building. The driver admitted liability to police. Rebuilding cost $4204. The Trucking Co. Insurance sent a check for $3818, citing depreciation. The Trucking Co. refuses to pay us the difference. What do we do beside "eating the difference"?


Staff response: Thank you for your question. It is a common one. Our experience tells us that if you had functional overhang with no obvious damage prior to the accident, you should not have to "eat the difference". Depreciation is usually taken when a policy holder makes a property claim against their own coverage, and that coverage is for actual value rather than replacement value.

For a third party claim, the at-fault driver's liability carrier owes to put you back as you were before the accident. Depreciation might be seen in automobile cases where a vehicle has bald tires but the owner wants to be paid for new ones. The simple facts are that you had a functional overhang before their insured driver hit it, and now you do not. Unless your overhang was made of rotten wood and hanging off the side of the building anyway, or you are upgrading the overhang to add a fancy new sign or light fixture, there is no basis for taking depreciation.

If you have not already requested that the at-fault driver's insurance company put their reasons for partially denying your claim in writing, do so now. If you are merely being subject to the whim of an insurance adjuster, this request should give him or her cause to reconsider. You might remind the adjuster that you do have the option to bring this situation to the attention of the Insurance Commissioner of Alabama (see our Insurance Commissions page). If the insurance commissioner sees a pattern of arbitrary depreciations, it will levy fines that will make your claim seem insignificant by comparison.

It might do to remind the liability insurance carrier that if you were to go through your own insurance company (a first party claim), yours would pay the entire amount minus your deductible. Then your carrier could submit the case to arbitration and would recover the full amount (what they pay plus your deductible). Why wouldn't the liability carrier just go ahead and resolve this now so that their adjuster can spend his time on other cases?

Stand firm in your insistence that you be paid to have the overhang replaced. Do not cash the check if you want to maintain any leverage that you have. The insurance company should not want to risk a lawsuit in small claims court over the $386.00 difference between your cost and their settlement offer. It would be so much easier and cost efficient for them to pay your claim and close their file. Plus, it would be the right thing to do.

We hope this answers your question. Thank you for taking the time to write to us, and good luck with your claim. If you have the time, let us know how things turn out. It certainly sounds like you are in the right.

This response is written for informational purposes and is not intended to take the place of competent local legal counsel.

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