Calculating Actual Cash Value, Part 28: Nevada

There are two relevant cases that have addressed how to calculate actual cash value in Nevada: Replacement Cost Less Depreciation.

The first case is a Ninth Circuit Court of Appeals opinion, Sierra Pacific Power Company v. Hartford Steam Boiler Inspection & Insurance Company.¹ Here, the insured sought replacement cost value for the insured property, a dam, which was destroyed by a flood. The insurer contended that it was not liable to pay the replacement cost since the dam was not rebuilt within two years from the date of loss. The policy provided, “in the event of loss or damage to property which is not repaired, rebuilt or replaced within two years from the date of loss or damage, the company shall not be liable for more than the actual cash value…of the property destroyed.” The Sierra court determined that the actual cash value for the dam is determined using replacement cost reduced by the appropriate depreciation and cited the Nevada Supreme Court’s opinion in Richfield Oil Corp. v. Harbor Insurance Company.²

In Richfield Oil Corp., the court explained that the only evidence of actual cash value presented at trial was replacement cost (estimated actual replacement) less depreciation (“the cost of repairs which would be necessary to restore the building to its former condition less depreciation”). The appellant made no objection to this methodology at trial and offered no contrary evidence supporting any different measure. Therefore, under these circumstances, the court perceived no “error” in applying this standard and reasoned: “Many courts in insurance cases favor this method as the test for arriving at the actual cash value of a building.”³
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¹ Sierra Pac. Power Co. v. Hartford Steam Boiler Inspection & Ins. Co., 0304-CV0034-LRH-RAM, 2007 WL 2407037 at *5 (D. Nev. Aug. 20, 2007).
² Richfield Oil Corp. v. Harbor Ins. Co., 452 P.2d 462, 467 (Nev. 1969).
³ Id.