Illinois Supreme Court Decision: Sproull vs. State Farm and How Farm Back DOI will resolve complaints. Carl Menconi asked 2 years ago
Illinois Supreme Court Decision: Sproull vs. State Farm and How Farm Back DOI will resolve complaints.

Dear Legal,

When the Illinois Supreme Court ruled in favor of Sproull for contract ambiguity in 2021 concerning labor depreciation and the definition of Actual Cash Value, does the Department of Insurance have the option (or instead the obligation) to resolve labor depreciation claim disputes occurring prior to the Court’s decision, and if so, how many years prior to that decision can (or must) the agency go, being the Court’s decision is pursuant to common law predating Lincoln (not new law); where the existence of ambiguity occurred at the time of the policy’s writing, thus nullifying the carrier’s right to labor depreciate at the time of its writing.

There was also the Illinois case of Jenkins vs. State farm which was dismissed for a statute of limitations problem, yet the court gave an opinion that labor depreciation is not depreciable; and violates Illinois statute.

I contacted the agency’s General Counsel by email twice and left 3 additional messages during the last month concerning this request for the department’s official position, and have not heard back.

Your help is much appreciated.

1 Answers
Answer for Illinois Supreme Court Decision: Sproull vs. State Farm and How Farm Back DOI will resolve complaints. United Policyholders Staff answered 2 years ago
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Dear Carl,

Thank you for your inquiry concerning past loss adjustments that calculated Actual Cash Value in ways that were inconsistent with the ruling in Sproull. We consulted with an Illinois-based attorney regarding your question, and this response includes that expert’s recommendations.

Your questions reflect some misunderstandings of the role of the Department of Insurance (the “Department”) with regard to complaints that may be made by policyholders and insurance companies directly to the Department.

The Department does not resolve disputes between policyholders and insurers. Adjudicating such disputes belongs to the judicial system. The role of the Department is to provide guidance to insureds and insurance carriers and to ensure that insurance carriers are complying with the Illinois Insurance Code and the related regulations.

In Sproull, the Illinois Supreme Court determined that certain policy language concerning the method of calculating Actual Cash Value was ambiguous. As such, the Court interpreted the policy language in favor of the insured, such that labor and equipment included in the calculation of Replacement Cost Value could not be depreciated when calculating Actual Cash Value. Only materials could be depreciated under the policy language at issue.

Thus, any past loss calculation by an insurance carrier involving the same policy language where the insurance carrier depreciated anything other than materials to calculate Actual Cost Value would qualify as a breach of contract. Such a claim would belong to the insured. The statute of limitations for such a claim is 10 years.

To specifically answer your question, the Department has no obligation to consider or even evaluate past loss adjustment calculations. Rather, it would be the responsibility of each policyholder to evaluate past loss adjustments and determine whether the insurance carrier breached the contract – and if necessary, file a complaint with the appropriate court.