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Hartford is facing a class action suit from almost 20,000 California policyholders who allege that the insurer routinely underpays claims for damaged property.
According to the plaintiffs, The Hartford engages in practices that involve depreciating items not subject to such reductions under the stipulations of the policy or state law. The firm has also been accused of decreasing sales tax paid on replacement items.
The Recorder reported that the class suit originated from a complaint filed in 2015 concerning an antique early 20th century building in San Francisco that sustained damage from a fire.
In the original complaint, the plaintiff said that the insurer depreciated the cost of items including baseboards, cement, drywall, insulation, marble, lath and plaster, plumbing, and ornamental iron, among others, often by significant amounts. For instance, the complainant said that the replacement cost for plumbing was reduced by more than 42% while the replacement cost for marble was whittled down by 80%.
The Hartford filed a motion to have the class certification denied, and sought summary judgment, both of which were denied by Judge William Orrick.
Judge Orrick outlined that the company’s policyholders “may decide, for a variety of reasons, to take (the actual replacement value) to which they are entitled and not rebuild all of the structure…”
“The measure of damages is not the difference between the amount of money spent on repairs and what was paid out, but rather the difference between what Hartford paid out and what it should have paid out,” Orrick explained.
As for the sales tax, the judge ruled that it “constitutes a non-tangible item not subject to deduction at all” under the policy or under the state insurance code.
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