Schoening Investment LP, a Florida-based limited partnership, sued Cincinnati Casualty Company after the insurer deducted $45,000 for depreciation from a settlement offer for damage to one of Schoening's commercial properties in Kentucky. Schoening had purchased optional coverage that would pay repair costs "without deduction for depreciation," but only if repairs were actually completed within two years of a covered loss.
Chief Judge Sutton, writing for the three-judge panel, explained that the insurance policy's "Loss Payment" and "Valuation" provisions created a clear framework requiring depreciation deductions unless the optional coverage conditions were met. "By the terms of the Valuation and the Optional Coverage provisions, Schoening does not qualify for a depreciation-free payment," Sutton wrote, noting that "the insured must prove compliance with the policy's conditions precedent" to recover under enhanced terms.
The case began when Schoening filed suit in March 2024 seeking to represent a putative class of policyholders who allegedly faced improper depreciation deductions. U.S. District Judge Douglas Russell Cole granted Cincinnati Casualty's motion to dismiss for failure to state a claim, finding that Schoening had not qualified for depreciation-free coverage under the policy terms.
The ruling reinforces insurers' ability to structure coverage with conditions precedent that require actual completion of repairs before enhanced coverage kicks in. The decision also demonstrates how courts will interpret insurance policies according to their plain language, even when overlapping terms might create some redundancy, as the Sixth Circuit rejected Schoening's arguments about policy ambiguity and contractual surplusage.