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ACV Does Not Include Replacement Costs For A Total Loss (PA)

March 5, 2021

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<p style="text-align: justify;">In <em><a href="">Davis et al. v. Progressive Advanced Ins. Co. et al.,</a></em> the United States District Court for the Eastern District of Pennsylvania recently analyzed whether the plain language of the plaintiffs’ Davis and Gress' insurance policies required Progressive to pay the Plaintiffs the actual cost value (“ACV”) for a total loss to their vehicles, and if so, whether the ACV includes replacement costs such as mandatory title and registration fees.</p>
<p style="text-align: justify;">By way of brief background, the Plaintiffs’ vehicles suffered a total loss. In response, Progressive settled with Davis by paying Davis the ACV of the vehicle plus sales tax, reduced by the deductible, while Progressive settled with Gress by paying Gress the ACV of the vehicle plus sales tax minus the deductible and salvage value. The respective policies provide that Progressive will pay for “sudden, direct and accidental loss to a covered auto.” Under the limits of liability section, the policies provide “the limit of liability for loss to a covered auto” is the lesser of: “1) the ACV of the damaged property at the time of the loss less the applicable deductible; 2) the amount necessary to replace the damaged property less the applicable deductible; 3) the amount necessary to repair the damaged property to its pre-loss condition less the applicable deductible; or 4) the stated amount shown on the declarations page for that covered auto.” This section of the policies provides the ACV “is determined by the market value, age, and condition of the vehicle at the time the loss occurs.</p>
<p style="text-align: justify;">In its motion for summary judgment, Progressive argued that the policies only required it to pay for a “sudden, direct and accidental loss”, which translates to the cost of damages and not the liability limit of the ACV, whereas the Plaintiffs asserted the policies required Progressive to pay the ACV for a total loss. In accordance with Pennsylvania case law, the court determined that, since the Plaintiffs and Progressive agreed the losses were greater than the limit of liability (i.e., the ACV), the Plaintiffs were entitled to the ACV.</p>
<p style="text-align: justify;">The court then analyzed whether the policies’ language regarding the ACV was clear to determine whether the plain language of the policies controlled. In doing so, the court held the policies unambiguously defined the ACV in stating how it is determined. Accordingly, the court held that when paying a liability limit under the policies, Progressive is obligated to pay lower of (1) the ACV and (2) “the amount necessary to replace” the damaged property reduced by the deductible, which might include costs of title and registration. To avoid any redundant meanings in the policy language, ultimately the court held it would not impose the full breadth of replacement costs into the ACV. In other words, Progressive was not obligated to cover the replacement costs, such as mandatory title and registration fees.</p>
Thanks to Lauren Berenbaum for her contribution to this post. Please contact <a href="">Heather Aquino</a> with any questions.

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