Yes, Allstate has faced multiple class action lawsuits alleging that it wrongfully withheld labor costs from homeowners’ insurance claims by treating those costs as “depreciable” under actual cash value (ACV) policies. In the largest settlement to date, Allstate agreed to pay $22.5 million to more than 13,000 Ohio policyholders who had their roof repair claims improperly reduced between May 2015 and June 2021. The core issue: labor does not wear out or lose value over time the way materials do, so applying depreciation to labor costs is a fundamental misapplication of ACV principles.
This article explains how Allstate’s practices have been challenged, what settlements have recovered, and whether you may qualify for compensation. The dispute has spawned multiple lawsuits across different states because Allstate’s approach was not unique to one location or claim type—it became part of the company’s standard underwriting practices for years. From Ohio to Arizona to Mississippi, policyholders discovered that Allstate had reduced their claim payments by applying depreciation percentages to labor costs, even though these percentages have no logical basis (you cannot depreciate the act of replacing a roof). We’ll cover the major settlements, ongoing litigation, and how to determine if your claim was affected.
Table of Contents
- What Does It Mean to Depreciate Labor on a Roof Repair Claim?
- How Are Courts Interpreting the Depreciation Debate?
- The Perry v. Allstate Settlement—the Landmark $22.5 Million Recovery
- The Shumway v. Allstate Case—Ongoing Arizona Litigation
- The Mississippi Settlement—100% Labor Depreciation Recovery
- How to Determine If Your Allstate Roof Claim Was Affected
- Future Outlook—Are Insurance Companies Still Depreciating Labor?
What Does It Mean to Depreciate Labor on a Roof Repair Claim?
When an insurance company uses “actual cash value” (ACV) rather than replacement cost value (RCV), it theoretically accounts for wear and tear on damaged property. If a house has a roof that is 10 years old and the roof is destroyed by hail, ACV might pay less than the full replacement cost because that roof had already depreciated. However, this logic applies to materials, not labor. When a contractor replaces that roof, the labor involved—the skilled work, tools, and time—does not depreciate based on the age of the original roof. A roofer in 2024 charges roughly the same per hour regardless of whether the old roof was 5 years old or 15 years old.
Allstate’s position in these cases was to apply the same depreciation percentage to both materials and labor. If a roof was calculated to be 40% depreciated due to age, Allstate would reduce both the materials cost and the labor cost by 40%. Some policyholders discovered they were being offered only $3,000 in labor when the actual cost to replace it was $5,000, because Allstate had applied a depreciation deduction that had no justification. The distinction matters enormously: a $2,000 reduction in a single claim might not seem huge, but across 13,000 claims in the Perry settlement alone, it totaled $22.5 million in improper withholdings. The legal argument against Allstate’s approach is straightforward: if your homeowner’s policy says “actual cash value” but does not explicitly state “labor permissive” or “labor depreciable,” then labor should not be subject to depreciation at all. Courts in multiple jurisdictions have sided with policyholders on this interpretation, reasoning that ACV is already a limitation on what you receive (compared to RCV), and applying depreciation to labor compounds the unfairness by treating an economic cost differently from the way the industry understands it.
How Are Courts Interpreting the Depreciation Debate?
Federal and state courts have increasingly ruled against insurance companies that depreciate labor costs, creating a clear trend in policyholder favor. The reasoning is consistent across jurisdictions: the term “depreciation” in insurance contexts refers to the diminished value or usefulness of tangible property. Labor is not property—it is a service. Once a service is performed, it cannot depreciate further; the roof repair is completed and retains its value regardless of when the contractor performed it. Courts have found it illogical and commercially unreasonable to treat labor like a material good that loses value over time. However, if your policy explicitly permits “labor depreciation” or contains language stating that labor is treated as part of the depreciable loss, your claim may face different legal outcomes.
Some policyholders discovered only after litigation that their specific policy language included a “labor permissive” rider, which complicated their claims. This is why reviewing your actual policy document is critical: what works in one case may not apply if your policy has different wording. Additionally, some state insurance codes and regulations now prohibit the practice, but if your loss occurred before those protections were in place, you may still have grounds for a claim based on common-law contract interpretation or state consumer protection laws. The shift in judicial thinking has pressured Allstate and other insurers to settle rather than litigate. Defense costs and the risk of jury trials have made settlement more economical, especially in class actions where multiple thousands of claims are at stake. Even cases Allstate might have won on technical grounds have been settled to avoid the reputational damage of being seen as the company that depreciates roofers’ wages.
The Perry v. Allstate Settlement—the Landmark $22.5 Million Recovery
The Perry v. Allstate settlement stands as the largest recovery for policyholders on this issue. The case involved 13,000+ Ohio policyholders whose structural damage claims were processed between May 16, 2015 and June 30, 2021. Allstate agreed to pay $22.5 million in total compensation, with individual policyholders receiving between $25 and $500 depending on how much “nonmaterial depreciation” was originally withheld from their claims. The settlement also included $5.5 million in attorney fees and costs. What makes the Perry settlement significant is that it established a clear precedent: Allstate’s depreciation practice was systematically wrong across a multi-year period and a large geographic area.
The settlement required Allstate to identify all affected claims within the class period, recalculate the depreciation that was improperly applied to labor, and issue checks to claimants. Some policyholders received modest payments of $50 or $100, while those with larger structural damage claims received the maximum $500. Even small payments acknowledged the principle: Allstate had overstepped, and compensation was owed. The Perry settlement also established a process that other settlements have followed. Claims administrators were appointed to verify that claimants were part of the class period and had received depreciation deductions on labor. This verification matter because not every Allstate customer in Ohio during that time period would have filed a claim, and not every claim would have included structural damage requiring labor depreciation calculations. Policyholders who believed they qualified could submit claims with supporting documentation, though many learned about the settlement only through direct notice or legal advertisements.
The Shumway v. Allstate Case—Ongoing Arizona Litigation
While Perry was settled, litigation in other states has continued. One active case is Shumway v. Allstate, filed in April 2023 in the U.S. District court for the District of Arizona (Case No. 2:23-cv-00699-PHX-DLR). The plaintiff in this case, Lillie Hernandez, claims that Allstate withheld labor costs as “depreciation” on her roof repair claim from August 2022. In October 2023, U.S.
District Judge Douglas L. Rayes ruled that the case could proceed, denying Allstate’s motion to dismiss. What is notable about Shumway is the timing: this claim occurred long after Perry was settled, suggesting that Allstate’s practices either continued despite the Ohio settlement or resurfaced in different states. The fact that Judge Rayes allowed the case to proceed means he found Hernandez’s allegations plausible and that Allstate’s arguments for dismissal were insufficient. The case is still in its early stages, but it signals that Arizona courts are also open to labor depreciation claims against Allstate and that policyholders in that state may have viable claims. The Shumway case is important if you have a roof claim from Allstate filed in Arizona or if you are pursuing a similar claim in another state. It shows that courts are not rubber-stamping Allstate’s depreciation practices and that individual plaintiffs can challenge the company even after major settlements have been reached. The case also demonstrates that no state is off-limits; if Allstate applied labor depreciation to your claim, you may have recourse regardless of where you live.
The Mississippi Settlement—100% Labor Depreciation Recovery
In 2025, a federal court approved a class action settlement where Allstate agreed to return 100% of the labor depreciation it had previously withheld, plus interest. The Mississippi settlement exceeded $1.4 million in total value. This settlement is significant because it went even further than Perry: rather than offering modest per-claim payments, it mandated a complete reversal of the labor depreciation, meaning affected policyholders would receive the full amount Allstate had improperly deducted. The inclusion of interest in the Mississippi settlement is also noteworthy. Policyholders did not receive their correct amount at the time of claim; they had to wait years for litigation and settlement to recover what should have been paid initially.
The interest component compensates for the use of that money—the time value of the withheld funds. This sets a potential precedent for other settlements: if your claim was affected and you are pursuing recovery, you may have grounds to demand not just the depreciation amount but also interest accrued since the claim was paid. However, a limitation to remember is that state-specific settlements may not apply to you if you live in a different state. The Mississippi settlement covers Mississippi policyholders; Ohio policyholders would fall under Perry; Arizona may eventually have its own settlement if Shumway succeeds or settles. You need to identify which state’s settlement—if any—applies to your claim based on where the loss occurred and which policy governed it.
How to Determine If Your Allstate Roof Claim Was Affected
To know if your claim may qualify, you need to check four things: (1) Was your claim with Allstate? (2) Did your claim involve structural damage, particularly roof repair or replacement? (3) Was your policy ACV-based rather than RCV? (4) Did the claim settlement letter or check stub show a depreciation deduction applied to labor costs? Many policyholders do not discover the depreciation issue until years later, when they compare what they received to the contractor’s estimate or invoice. You can request a copy of your original claim file from Allstate, which will show the adjuster’s calculation and how depreciation was applied. Look for line items that specify “labor” and then show a percentage reduction (e.g., “Labor: $5,000, less 40% depreciation = $3,000”).
If you see this pattern, you likely have a valid claim. Even if you do not have your claim documents, you can contact a class action attorney who handles Allstate cases; they can subpoena Allstate’s records and determine whether you were part of an affected group. The statute of limitations for class action claims varies by state, but many older claims may still be within the filing window, particularly if the claim was settled within the last 5–7 years. If your claim is outside the window for past settlements but recent enough to be noticed, you may have grounds for a new individual or class action claim, especially if you live in a state where Allstate’s labor depreciation practice is now prohibited or disfavored.
Future Outlook—Are Insurance Companies Still Depreciating Labor?
The trend following Perry, Mississippi, and other settlements has been toward insurers being more cautious about labor depreciation claims. Allstate, in particular, has been sued enough on this issue that its underwriting standards have likely shifted to avoid additional litigation and regulatory scrutiny. However, other insurers have faced similar claims, and the practice is not entirely extinct in the industry.
Regulators in some states have also begun scrutinizing labor depreciation practices more closely. Looking forward, the legal landscape may continue to tighten. If more states explicitly prohibit labor depreciation in ACV policies, or if class actions continue to succeed against insurers, the cost of these practices will exceed any savings the insurers achieved by underpaying claims. For now, policyholders should be aware that labor depreciation is still a potential issue and should review their claim documentation carefully, especially for structural damage claims.