U.S. Courts Favor Insureds in Recent Litigation Over Sales Tax and Labor Depreciation

Recent U.S. court decisions have continued to shape the landscape of insurance litigation, particularly in matters concerning sales tax inclusion in settlements and labor depreciation. In a notable Sixth Circuit ruling on October 11, 2024, the court decided that the term 'actual cash value' in an auto insurance policy should include sales tax, a decision which could have broad implications for total-loss settlements across the industry. Similarly, class action lawsuits regarding nonpayment of sales tax by insurers are seeing movements, such as the Ohio appellate court affirming class certification, reflecting a trend towards favoring insured parties in such disputes.

In Texas, courts have been active in addressing the contentious issue of labor depreciation in insurance claims. Following federal precedent, a Texas court ruled that labor costs should not be depreciated, aligning with the consumer-friendly interpretation of policy terms. Moreover, in litigation over privacy issues and personal health information, insurers have had mixed results, with some courts dismissing claims based on procedural grounds, while others grapple with the intricacies of compliance with privacy regulations.

These developments are pivotal for insurance professionals, signaling a potentially increased cost for insurers and altered practices in claims processing. As courts continue to interpret policy language in favor of consumers, the industry must adapt to ensure compliance and mitigate risks associated with litigation.