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Definitions | Specialty Items | Time/Work Allocation Table | Indicators of Casualty Fraud

Definitions

ACTUAL CASH VALUE
It is a composite of factors all directed at determining value at time of loss, but ACV frequently id defined as present new cost less reasonable depreciation.

DEPRECIATION

The decrease in value of property over a period of time due to wear, tear and obsolescence is the depreciation of that item.

The formula to follow is:
Age of item / Life Expectancy = % Depreciation Applicable.

Example:
Refrigerator 5 yrs old / Life Expectancy---15 years = 33 1/3% Depreciation Applicable

BETTERMENT
Betterment is the increased value of a used product after repairs or replacement with a new item. When discussing loss adjustment with an insured it is psychologically advantageous to use the term betterment rather than depreciation. This expression indicates positive results whereas depreciation indicates negative results.
Note: Both betterment and depreciation are based on the concept that the insured must be returned to the same position he occupied at the time of the loss.

MEASURE OF LOSS
This is the cost to repair or replace less betterment.

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Specialty Items

The specialty items listed below are not conducive to establishing a reasonable useful life expectancy, and therefore have been set out separately. In the event of a loss involving any of the specialty items shown, it is recommended that the adjuster obtain a verification of the reported values from reputable and knowledgeable dealers.
Specialty items included, but not limited to those listed are:
Antiques - Heirlooms
Collections - Numismatic (coin) Collections - Philatelic (stamp) Collections
Crystal Silverware
Fine Arts Thesis, Lecture Notes, Manuscripts, etc.
Jewelry

DIRECTIONS FOR USE OF DEPRECIATION GUIDES
1. The most important factor in determining depreciation is good judgment. Depreciation will vary with usage, which in turn, varies with each individual and family. Determination of the value of an article that is lost, damaged or destroyed requires consideration and reporting of all pertinent factors, including the quality of the article, model, brand, extent of wear and tear, and the extent to which the article had been used prior to the incident in which generated the claim. A depreciation guide or schedule is to be used in conjunction with other indications of value including visual inspections, wherever possible.

2. Figure depreciation to the nearest dollar.

3. Despite age, all times have some value remaining. Do not depreciate more than 90% in any case. However, property that is simply worn out has no value except, scrap or salvage.

4. Recognize that better materials or workmanship may depreciate at a slower rate.

5. Some items, such as major appliances or clothing actually have a greater rate of depreciation the first year than they do in following years.

6. The guide is on the liberal side and it may be noted that allowances exceed the manufacturer's warranty period when applicable. In most cases, the settlement
should be less than the suggested maximums.

7. It is important to try and reach a harmonious agreement. Therefore, establish the reasonable useful life first, the actual age second, and negotiate the settlement accordingly.

8. Do not hesitate to call local dealers for confirmation of depreciated values.

9. Deviations may be made, provided they are properly explained.

10. Recent major repairs may add to otherwise depreciated value.

ARTICLES WHICH DO NOT DETERIORATE APPRECIABLEY. Normally no depreciation will be charged against articles composed of highly durable materials such as gold, silver, platinum or other precious metals, or slate, stone, or concrete when a part of household goods unless evidence indicates otherwise.

SLOWLY DEPRECIATING ARTICLES. The value of articles composed of moderately durable materials such as the common metals, wood or high-grade plastics, will normally be depreciated b y 4% per year.

MODERATE DEPRECIATING ARTICLES. Articles composed of non-durable materials such as wicker, leather , most plastic and fur will be depreciated by 10-25% per year.

RAPIDLY DEPRECIATING ARTICLES. Articles composed of rapidly depreciating material and articles affected by changes in style or fashion will be depreciated at a much higher rate. Certain style changes in clothing have the effect of lowering the value of the items drastically despite the fact that the material itself may not be worn excessively.

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TIME/WORK ALLOCATION TABLE

The property adjuster, examiner/supervisor can quickly convert various units of building repair features into hours of labor by utilizing this chart. The allocation for hours shown depict average estimated time factors and are subject to variation and application of judgment in varying circumstances of degree of difficulty.

REPAIR FEATURE ................... UNIT ......................... HOURS

Carpentry, rough ...................... 45 F.B.M. .................... 1 Hour
Cleaning, Walls & Ceilings .......... 125 sq ft .................... 1 Hour
Dry Wall (including taping).......... 100 sq ft .................... 2 Hours
Masonry: Brick Walls ................. 100 Bricks ................. 12 Hours - Mason
.................................................................................. 12 Hours - Laborer
Masonry: Concrete Blocks ......... 100 Blocks ................. 4.5 Hours - Mason
.................................................................................. 4.5 Hours - Laborer
Painting (including openings) ....... 150 sq ft .................. 1 Hour
Papering .................................... 3 Rolls .................... 1 Hour
Roofing ...................................... 1 Square ................ 2 Hours
Roofing Removal ......................... 1 Square ................ 1 Hour

UNITS OF WORK
Cleaning - Walls & Ceilings .......................................... 9 square feet
Electrical .................................................................... Per Outlet
Glass Windows ........................................................... Unit Inch (UI)
Plate ......................................................................... Square Feet
Guttering ................................................................... Lineal Feet
Painting - 1 Coat 1 Gallon ........................................... 450 Square Feet
Plastering .................................................................. Yard
Roofing 1 Square ........................................................ 100 Square Feet

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Indicators of Casualty Fraud

Detection--The First Line of Defense
Most claims are legitimate, butmany are inflated or fraudulent. Therefore, it is appropriate for the adjuster to review all claims for possible fraud. Determining the “fraud probability” of any claim is facilitated when the adjuster is familiar with various fraud indicators.
These indicators, or fraud possibility factors, should help isolate those claims which merit closer scrutiny. No one indicator by itself is necessarily suspicious. Even the presence of several indicators, while suggestive of possible fraud, does not mean thata fraud has been committed. Indicators of possible fraud are not evidence that fraud has occurred.
All suspicious claims, though they may have to be paid for lack of conclusive evidence of fraud, should be referred to NICB. There is no limit to the number of cases you may refer. No claim is too small for referral.

Generic Indicators of Insurance Fraud

Note: Adjusters should familiarize themselves with the following general indicators of insurance fraud which may apply to more than one type of fraud scheme. After review of the general indicators, the adjuster can then refer to the more specific fraud categories
which follow.

It should be noted that the following categories of fraud are separated merely to facilitate your understanding of that type of fraud. However, multiple forms of fraud may appear in a single claim. For example, in a slip and fall products llability claim, there may also be evidence of both medical and lost earnings fraud.

  1. Claimant or insured is excessively eager to accept blame for an accident, or is overly
           pushy or demanding of a quick, reduced settlement.

  2. Claimant or insured is unusually familiar with insurance terms and procedure, medical,
           or vehicle repair terminology.

  3. One or more claimants or insured list a post office box or hotel as address.

  4. All transactions were conducted in person; claimant avoids using the telephone or the mail.

  5. The kind of accident or type of vehicles involved are not typical of those seen on a regular
           basis. Claimant threatens to go to an attorney or physician if the claim is not quickly settled.

  6. Claimant is a transient or out-of-towner on vacation.

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