It is Best for Insured to Read Policy Before Filing Suit

By Barry Zalma on April 2, 2026

RCV Available Only Repair is Completed Within Two Years of Loss

Post number 5315

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He Who Fails to Read Policy Must Still Fulfill its Conditions

In Schoening Investment LP v. Cincinnati Casualty Company, No. 25-3273, United States Court of Appeals, Sixth Circuit (March 25, 2026) Schoening Investment LP, a Florida-based limited partnership focused on commercial real estate, insured its Kentucky properties with Cincinnati Casualty Company. In March 2022, one of Schoening’s Kentucky properties suffered damage. Schoening filed a timely claim, seeking recovery under its commercial property insurance policy.

FACTUAL BACKGROUND

Cincinnati Casualty’s adjuster found the property was repairable but not replaced and offered to pay the cost of repairs minus a $45,000 deduction for depreciation. The adjuster noted that once repairs were completed, Schoening could recover the depreciation amount.

INSURANCE POLICY

Schoening had purchased additional coverage that would pay for repairs without deduction for depreciation, but only if repairs commenced within two years of the loss. Since Schoening had not repaired the property, Cincinnati Casualty applied the depreciation deduction. Unhappy with this determination, Schoening sued Cincinnati Casualty in March 2024, alleging breach of contract and improper deduction of depreciation.

The contract contains one other relevant feature. Schoening paid for “Optional Coverage” that modified the Valuation provision. The Optional Coverage provision “replaces” the term “Actual Cash Value” with “Replacement Cost without deduction for depreciation.”

This full replacement-cost payment anticipates the “shortfall in coverage” that might result from compensation for “actual cash value alone.” For instance, if hail destroyed a ten-year-old roof, a policyholder entitled to “Actual Cash Value” would recover the value of a ten-year-old roof, only to find that ten-year-old shingles are not readily on the market and that new shingles cost much more than ten-year-old shingles are worth. Schoening’s additional coverage avoids this problem by paying for the purchase of new shingles as long as he does so within two years of the damage causing event.

LEGAL ISSUES

The dispute centers on the interpretation of the commercial insurance policy, specifically the provision allowing for repair cost payment “without deduction for depreciation” if repairs are commenced within two years.

Cincinnati Casualty’s actions were challenged under the Federal Rules of Civil Procedure, Rule 12(b)(6), regarding failure to state a claim. The district court examined whether Schoening met the policy requirements to qualify for a depreciation-free payout to determine whether Cincinnati Casualty breached the terms of the insurance policy by deducting depreciation from repair cost payouts, and whether Schoening qualified for payment without deduction for depreciation under the policy..

DISCUSSION AND ANALYSES

The district court found that Schoening had not repaired the property within the required timeframe, making it ineligible for a depreciation-free payment. It also found that Cincinnati Casualty’s adjuster correctly applied the policy’s terms by deducting depreciation and informing Schoening that the deducted amount could be recovered upon completion of repairs.

Schoening’s argument that the insurer improperly deducted depreciation was rejected, as the policy explicitly authorized such deductions unless repairs were made as stipulated.

The court concluded that the insurer’s actions were consistent with both the policy language and established procedures for loss adjustment.

The Sixth Circuit affirmed the district court’s dismissal, agreeing that Cincinnati Casualty acted within the bounds of the insurance contract.

Before Schoening can claim the full payment, the Optional Coverage provision requires Schoening to “actually repair” the property. In the event Schoening does not repair the property, Schoening’s recovery reverts to the property’s “Actual Cash Value.”

ZALMA OPINION

After a loss those who are insured should actually read the policy contract. Apparently Schoening failed to read the policy or ignored what was read. Clearly, if Schoening wanted full replacement cost and had read the policy would have performed the repairs within the two years after the loss. Failing to do so and finding only ACV payments were available Schoening sued seeking coverage for which it did not pay and the Sixth Circuit affirmed the trial court because the language was clear and unambiguous.

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