Replacement cost: When is it appropriate?

Description

Abstract: To estimate the fair market value of destroyed property, appraisers typically use the comparable sales approach. But this approach is inappropriate in some circumstances. That’s when replacement cost comes into play. This article looks at a case in which a defendant appealed the judgment awarded to an insurer — and shows why the insurer’s experts enabled it to prevail. A sidebar discusses why the appeals court decided that a multiplier used in determining the award was appropriate. Factory Mutual Insurance Co. v. Alon USA L.P., No. 11-11080, Jan. 23, 2013 (5th Cir.)