Depreciation of Labor in Property Insurance Policies

District of Columbia Department of Insurance, Securities and Banking 1050 First Street NE, Suite 801, Washington, DC 20002 • 202.727.8000 • disb@dc.gov • DISB.dc.gov BULLETIN 25-IB-001-08/12 TO: All Property and Casualty Insurance Companies Licensed to Do Business in the District of Columbia FROM: Karima M. Woods, Commissioner RE: Depreciation of Labor in Property Insurance Policies DATE: August 11, 2025 The District of Columbia Department of Insurance, Securities and Banking (the “Department”) is issuing this bulletin to address the depreciation of labor expenses and other nontangible items in the definition of “actual cash value” (ACV) in property insurance policies. The basic objective in property insurance claims is to restore an insured to the same financial position after the loss as they were prior to the damaging event. This means the cost to repair or replace the damaged property with material of like kind and quality that was damaged, less depreciation of the property. Depreciation is a decline in a property’s value because of use, wear, obsolescence, or age. Labor, unlike physical materials, does not lose value or break down over time. The practice of depreciating labor expenses on property damage claims float a significant part of the labor repair costs to the consumer. This unfairly shifts the burden to the consumer during the repair process. This Department considers the depreciation of labor and other nontangible items in the definition of ACV to be an unfair claims settlement practice pursuant to D.C. Code § 31– 2231.17(b)(6). For the purposes of this Bulletin, nontangible items are defined as labor, taxes, fees, and overhead and profit. For the reasons stated above, the Department will not approve any policy form with language that allows for depreciation of labor on of labor and other nontangible items in the definition of ACV to be an unfair claims settlement practice pursuant to D.C. Code § 31– 2231.17(b)(6). For the purposes of this Bulletin, nontangible items are defined as labor, taxes, fees, and overhead and profit. For the reasons stated above, the Department will not approve any policy form with language that allows for depreciation of labor. Any questions or concerns regarding this Bulletin may be directed to the Insurance Bureau of the Department of Insurance, Securities and Banking by email at insurance.bureau@dc.gov or by phone at 202.727.8000.