In Graves v. American Family Mutual, Graves had roof damage and damage to her kitchen ceiling after a hailstorm. Her American Family homeowner’s insurance policy provided for recovery of the “actual cash value” at the time of a covered loss as well as the “replacement cost” of the damaged property once repairs are completed. She was given $4,432.78 for the roof and $489.22 for the kitchen ceiling as actual cash value, and was told she would get more money if the repairs were completed in a year.  The roof was repaired and the additional amounts paid, but not the ceiling. Graves sued, claiming American Family improperly depreciated the labor required for the ceiling.  Summary judgment was granted to American Family, and the 10th Circuit affirmed, noting the policy permitted the depreciation.

The Tenth Circuit’s opinion relied heavily on an Oklahoma case, Redcorn v. State Farm Fire & Casualty Co., 55 P.3d 1017.

If American Family could depreciate only the cost of materials in determining the actual cash value of Graves’ loss, she would receive a windfall based on labor costs she never incurred with respect to her kitchen ceiling. Such a result is contrary to the principle of indemnity because she would be in a better position than she was before the damage occurred. Had she wanted to recover the full replacement cost under her policy she should have had the repairs completed by the one-year deadline.