Depreciation in a Liability claim as a third party Elliott Jenneman asked 3 months ago
Depreciation in a Liability claim as a third party

I appreciate your attention to my question. I am a resident of Minnesota, and my property has suffered damage due to overspray paint from a construction project. The affected areas include the roof, siding, and deck and all affected items are less than five years old. Unfortunately, the nature of the paint used renders it incapable of being removed through conventional cleaning methods.

I am currently in communication with the painter’s insurance company, and they have acknowledged that the liability for the damages rests squarely with their insured party. At least five other properties experienced similar damage from the same incident with the same type of paint. Some of these property owners have successfully settled with the insurance company, receiving cash settlements equivalent to the full amount they had initially requested.

In my discussions with the insurance company, there have been references to factoring in depreciation. My concern pertains to the adherence of the insurance company to Minnesota laws governing fair insurance settlements. Specifically, Minnesota Statute 2A.201, Subdivision 5 stipulates that unfair settlement practices encompass “reducing or attempting to reduce any settlement for depreciation of an item not adversely affected by age, use, or obsolescence.” The items I am claiming are not adversely affected by age, use, or obsolescence. Furthermore, Minnesota Statute 72A.20, Subdivision 12(6); 12(13) prohibits insurers from “not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.”

Given that other claimants have received settlements in line with their requested amounts, including full replacement compensation, I seek clarification on whether the insurance company is legally entitled to depreciate the value of my property. Thank you!

2 Answers
Tim Johnson Tim Johnson Expert answered 3 days ago

Dear Elliott,

Your situation is complicated, as you might know. I cannot give legal advice through the forum. I suggest you consult an attorney.

The shortest answer is that the statute you cite governs the relationship between insurer and insured.  You are neither.  You have a claim against the painter and that painter is seeking indemnification from their insurance company for your claim.  If they are not appropriately evaluating the claim, that is an issue between the painter and the carrier.  You don’t have a contract with the carrier and can go after them for the full value of the claim irrespective of whether that insurer indemnifies its insured for that amount.

Moreover, this is an administrative statute that can only be enforced by the Department of Commerce who oversees insurance companies in Minnesota.  There is no private right of action under it.

Best of luck,

Tim Johnson

United Policyholders Staff answered 3 days ago

Dear Elliott,

Thank you for reaching out to United Policyholders. We are sorry to learn you’re having an insurance problem that requires legal help. While United Policyholders is not a legal referral agency, we do have a directory of consumer-oriented credentialed professionals who support our mission and have experience in insurance law.  

Please read our tips on Hiring Professional Help and Hiring an Attorney for an Insurance Claim, then visit our Find Help Directory, select your state, and then choose “attorney, legal help” from the dropdown menu. Before hiring any professional, it’s important that you understand how fees and costs will be handled, and speak with at least one prior client reference. 

Please note that UP strives to help consumers who are seeking qualified and reliable professional help, but we cannot warrant the work or services of professionals, even if they are listed in our Find Help directory or serving as volunteers with our organization. We encourage you to check references and thoroughly vet before hiring.

We hope this information is helpful.

Team UP