Help Understanding ACV Please!

My insurance policy states the following:

Actual cash value means the fair market value of stolen or damaged property immediately prior to the accident or loss, adjusted by: 

1. The age, mileage and physical condition of the property; 

2. Prior damage;  

3. Depreciation; and

4. The type of title that applies to the property if it is a motor vehicle.

The definition for FMV states: Fair Market pricing considers the average of a vehicle's "retail value," which is the price a consumer would pay to the dealership, and its "trade/book value," which refers to the price the dealership would pay you for your vehicle prior to any markup costs.

So for my vehicle I was offered $14K as a trade in.

Retail Price at dealership for same car with same miles is going for an average of $18K

So lets say the fair market value is then the average of the these two numbers and equals $16K

Cars are the same year, mileage, and in excellent condition. There is no prior damage and both have a clean title. Wouldn't the ACV of the vehicle be $16K then?

What am I missing here? Because the insurance company offered $12K and people keep telling me that is the ACV and You do not get replacement cost. That offer is $2K less than I was offered as a trade in.

ACV = FMV = Retail Value + Trade In or Book Value /2

If the comps cars have the same age, mileage, title status, physical condition, and no prior damage then what is being deducted from the FMV? The dealer markup is already accounted for by averaging the values.

Make it make sense. Please.