DC Bulletin: Depreciation of Labor in Property Insurance Policies

DC Insurance Bulletins

Published August 11th, 2025

Detected March 19th, 2026

Summary

The District of Columbia Department of Insurance, Securities and Banking issued a bulletin clarifying that depreciating labor expenses in property insurance policies is considered an unfair claims settlement practice. Insurers are instructed not to approve policy forms that allow for the depreciation of labor.

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What changed

The District of Columbia Department of Insurance, Securities and Banking (DISB) has issued Bulletin 25-IB-001 to clarify its stance on the depreciation of labor in property insurance policies. The bulletin states that depreciating labor expenses, as well as other non-tangible items such as taxes, fees, and overhead, in the calculation of Actual Cash Value (ACV) is considered an unfair claims settlement practice under D.C. Code § 31–2231.17(b)(6). The Department will not approve any policy forms that permit the depreciation of labor.

This bulletin requires all property and casualty insurance companies licensed in the District of Columbia to review their policy forms and claims handling practices. Companies must ensure that their policies do not include language allowing for the depreciation of labor costs. Failure to comply may result in findings of unfair claims settlement practices. While no specific compliance deadline is provided, the Department's stance implies immediate adherence to prevent future violations. Insurers should update their policy language and claims adjustment procedures accordingly.

What to do next

Review all property insurance policy forms to ensure no language allows for the depreciation of labor costs.
Update claims handling procedures to exclude depreciation of labor expenses when calculating Actual Cash Value.
Ensure compliance with D.C. Code § 31–2231.17(b)(6) regarding unfair claims settlement practices.

Penalties

Considered an unfair claims settlement practice pursuant to D.C. Code § 31–2231.17(b)(6).

Source document (simplified)

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. 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.