ACV, RCV, and GCOP: Why the Ninth Circuit’s Ruling Matters to Claims Professionals and Policyholders

This week’s ruling by the Ninth Circuit in Dow v. Safeco Insurance Company of America ¹ serves as a timely reminder for claims professionals to revisit how to interpret actual cash value (ACV), replacement cost value (RCV), and general contractor overhead and profit (GCOP) under property insurance policies which define the terms. This case, which arose from hail damage to a Montana property, ² tested the boundaries of ACV entitlement and whether an insured can later challenge what was paid once repairs are completed. For anyone working in insurance claims, particularly those managing property losses involving large-scale repairs, the implications are worth noting. It also reminds policyholders that lawsuits require a showing of damages because courts do not make moot findings.

At the heart of the dispute was Safeco’s exclusion of GCOP from the ACV payment for roof repairs despite including GCOP for other structural items. The plaintiff, Susan Dow, argued that under the policy’s two-step settlement process, Safeco owed her the full ACV upfront, including GCOP for the roof, because the repair work was complex enough to require a general contractor. She maintained that GCOP is typically included in the estimated repair costs, even if the homeowner never incurs that expense. Dow’s position was that once an insurer determines that GCOP is reasonably likely to be incurred, it must be included in the ACV calculation. Importantly, Dow argued that what the insured ultimately spends on repairs should have no bearing on what was owed at the ACV stage.

Safeco’s defense was rooted in policy language. The policy defined ACV as the estimated cost to repair, less depreciation, and specified that RCV would only be paid after the insured completed repairs. Safeco had, in fact, paid Dow over $28,000 for roof repairs once they were completed, including a GCOP allowance. Dow later tried to argue that a revised estimate issued by Safeco after the repairs were done entitled her to a new or supplemental ACV payment based on that later figure.

Safeco successfully argued the following:

[T]he Court may be left with the misimpression that Dow only sought an ACV payment for the damage to her roof, and that the Policy’s ‘replacement cost’ provisions are therefore irrelevant. This argument fails because Dow explicitly invoked and sought and received ‘replacement cost’ benefits. Indeed, the evidence conclusively establishes that Dow repaired her roof and then sought payment from Safeco for her roofer’s $27,345 invoice (which explicitly included GCOP). The undisputed record further establishes Safeco paid more than that invoiced amount for Dow’s roof claim. Further, the Policy provides that Safeco shall pay the ‘full cost of repair or replacement’ but not exceeding ‘the amount actually and necessarily incurred.’ Thus, Dow’s claim does, in fact, turn on this loss settlement provision that she sought, the repair costs Dow actually incurred, and the amounts Safeco paid Dow for those roof repairs. Measured by this language, Dow has no claim for more money or for breach of contract.

The Ninth Circuit rejected Dow’s approach, stating that ACV is forward-looking and must be based on prospective estimates—not using actual invoices or revised internal estimates. The court also noted that just because actual costs turn out to be lower than expected, or because RCV ends up covering the gap between ACV and the full repair bill, doesn’t mean the initial ACV payment was incorrect or that additional GCOP is owed based upon policy language. The Ninth Circuit emphasized that the policy structure is designed to front ACV as a reasonable estimate and then true-up with RCV. Because Safeco paid both ACV and an amount greater than what had been actually incurred once the work was completed, the court found no breach of contract because there were no damages.

Dow also alleged violations of Montana’s Unfair Trade Practices Act, but the court found Safeco’s interpretation of the policy to be reasonable and protected under statutory defenses. As Dow lacked a viable individual claim and her legal team was unable to find a replacement class representative, the court also upheld decertification of the putative class action.

When the policy says that the insurer has to pay the lesser of ACV, RCV, or the amount incurred, and the insurer pays more than the ACV and the amount incurred, there are no damages left to be paid. If the insurer pays too little on ACV and makes money holding the float, and the jurisdiction allows for pre-judgment interest, there could be a claim for damages. However, generally, an insurer paying more than the amount incurred to fix the damage is never going to result in a successful lawsuit for the policyholder.

One additional item of note. RCV and ACV in most jurisdictions are both theoretical amounts. Indeed, for adjustment purposes, property insurance adjusters should appreciate that these figures vary depending on several factors. Indeed, for adjustment purposes, they should be thought of as being in a range of reasonableness.

Some of you will want to challenge me on this notion. To help you, consider how different merchants and contractors charge different reasonable prices for the same products or services. While courts require a jury to provide one set number, the adjustment is fortunately not a court of law. Adjustments are opportunities to consider claims before a matter becomes one in the hands of lawyers and judges, where even the Almighty may not know what is going to happen.

For those interested in this topic, please read Replacement Cost Is Theoretical Even If Replacement Has Been Made, and an excellent post by Chicago-based attorney Ed Eshoo, Is a Repair Cost Estimate Relevant When Repairs Are Based on Actual, Incurred Costs?

Thought For The Day

“If at first you don’t succeed, then skydiving definitely isn’t for you.”
— Steven Wright

¹ Dow v. Safeco Ins. Co. of America, No. 23-2641, 2025 WL 1110742 (9^th Cir. Apr. 15, 2025).

² Dow v. Safeco Ins. Co. of America, No. CV 20-31 (D. Mont. May 19, 2023).