How ACV is determined, whether labor cost can be depreciated, and the rules on releasing withheld recoverable depreciation.
Actual Cash Value rule
Broad evidence rule (with a repair/replacement condition-precedent nuance)
Kentucky follows the broad evidence rule: all relevant evidence of value may be considered (age, likely profit on the property, tax value, etc.). The leading opinion also held that contractor overhead and profit are not depreciable and must be deducted separately from ordinary wear-and-tear depreciation and that actual repair/replacement (or a firm intent to do so) is effectively a condition precedent before certain deductions (profit, overhead, permit costs) can be taken from replacement cost.
Citation: Snellen v. State Farm Fire & Cas. Co., 675 F. Supp. 1064 (W.D. Ky. 1987)
Source: https://law.justia.com/cases/federal/district-courts/FSupp/675/1064/1637495/
Snellen is a federal district court decision applying Kentucky law, not a Kentucky Supreme Court opinion; it is widely cited and persuasive but not the state's highest authority on this point. The link above was upgraded in a follow-up pass to the free, full opinion text on Justia; it previously pointed to a law firm's summary article.
ACV statute or regulation
Kentucky has adopted a regulation that statutorily defines ACV as replacement cost less depreciation and expressly states depreciation may include labor if the policy provides for it, so Kentucky's rule permits rather than restricts labor depreciation at the regulatory level, though a federal appellate decision applying Kentucky law has gone the other way for undefined policies.
Kentucky Administrative Regulation 806 KAR 12:095, Section 9(3), part of the state's unfair claims settlement practices rule for property and casualty insurance, defines actual cash value as the replacement cost of property at the time of loss less depreciation, if any, and states that, if provided for in the policy, depreciation may include the costs of goods, materials, labor, equipment, overhead and profit, taxes, fees and services necessary to replace, repair or rebuild the damaged property. The same section requires the insurer to provide the insured, on request, a copy of claim file worksheets showing all depreciation deductions. This regulation does not ban or restrict labor depreciation, it affirmatively contemplates it when the policy allows it. Separately, applying Kentucky law where a policy left ACV and depreciation undefined, the Sixth Circuit held in Hicks v. State Farm Fire & Casualty Co., 751 F. App'x 703 (6th Cir. 2018), that labor should not be depreciated under those circumstances, consistent with the general undefined-term rule seen in other states, but the Kentucky Supreme Court itself has not resolved the question, and the state's own regulation goes the other direction for policies that do define depreciation to include labor.
Citation: 806 KAR 12:095, Section 9(3); Hicks v. State Farm Fire & Cas. Co., 751 F. App'x 703 (6th Cir. 2018)
Source: https://apps.legislature.ky.gov/law/kar/titles/806/012/095/
This is a case where the regulatory text and the leading court decision point in different directions depending on whether the policy defines ACV/depreciation, worth flagging clearly to avoid a one-line oversimplification. The premise that Kentucky is a labor-depreciation-restricting state does not match what the regulation itself says; the regulation as read permits labor depreciation when the policy provides for it.
Recoverable depreciation holdback
No Kentucky statute sets a holdback release deadline. The related labor-depreciation question remains undecided by Kentucky's own courts, though the Sixth Circuit (applying Kentucky law) leans against depreciating labor when the policy is silent.
No Kentucky statute or regulation specifically governing the timing or process for paying withheld recoverable depreciation was found. On the related scope question, Kentucky courts have not decided whether labor may be depreciated; the Sixth Circuit held labor should not be depreciated when 'actual cash value' is undefined in the policy, but the Kentucky Supreme Court has declined to resolve the underlying state-law question directly.
Citation: Hicks v. State Farm Fire & Cas. Co., No. 18-5104, 2018 U.S. App. LEXIS 28894 (6th Cir. Oct. 15, 2018).
Source: https://www.hkr.law/survey-of-state-law-regarding-depreciation-of-labor-costs-in-determination-of-actual-cash-value/
RESEARCHED from scratch. No holdback-timing statute found; this doctrine remains genuinely unsettled under Kentucky's own law, per a comprehensive, dated (Aug. 2025) 50-state survey.