For many years, property adjusters have had few resources or options available to help them calculate an appropriate replacement cost value based on LKQ for floor coverings when replacement is warranted. In the P&C claims industry, the acronym “LKQ” (Like Kind Quality) is used to describe an item or material that is similar in appearance, quality and value to that which is being replaced after suffering damage or total loss. LKQ is a determinant of value to ensure the policyholder will receive equitable coverage for what they lost. To accomplish this valuation task, many adjusters and insurance companies utilize the services of a specialized laboratory to help determine LKQ valuation. The process is initiated by filling out a request form, cutting out a piece of the damaged carpet and mailing it to the lab. Within a day or so, the lab returns a report that denotes the manufacturing specifications of the sample and includes a suggested benchmark retail price for a comparable replacement product. Alternatively, to save time and money, some simply rely on their experienced adjusters or other sources to make a professional yet subjective valuation opinion. Obviously, this practice can often be inefficient, inaccurate and difficult for the adjuster to defend the outcome.
There is little doubt that the use of a qualified lab or professional opinion is a valid and accepted way of getting to the desired valuation result. The better question may be: Is it required each and every time? As is the case with so many content or structural components in a home, the old 80/20 rule often applies in terms of product identification and valuation for LKQ. In the world of floor covering, nearly 90% of all carpets fall in a retail price range that may be considered “middle of the road.” That is to say that the great majority of carpets are tufted vs. woven, have basic synthetic backings, are made of standard fibers such as nylon or polyester and fall firmly in the middle of the 90% category. The remaining 10% are the ones that are extremely unique or made of wool and other expensive blends which may cost upwards to $250 per yard. It is this 10% that most adjusters are concerned with, as it presents the greatest risk in terms of valuation and settlement. Carpets like this should be evaluated with great scrutiny, not the typical 90%. However, the remaining 90% should not be left to evaluative assumption or conjecture. They should and now can be evaluated through a fast, yet economical process that is defensible, logical and based on the results of calculated visual, tactile and mathematical modeling.