WILDFIRE INSURANCE ALERT
Myers, Widders, Gibson, Jones & Feingold, LLP is one of the leading firms in the state assisting homeowners with wildfire claims. Partner Dennis Neil Jones, named a California “Super Lawyer” in the field of insurance law ten of the last 13 years, has handled hundreds of claims arising out of wild fires, dating back to 2003. This is a summary of the three most prevalent issues arising from wildfire damage to structures.
Unfortunately, after a home or business burns down, owners are often shocked to learn their policy limit is insufficient to cover the full cost of rebuilding. This is a common problem that may or may not give rise to a claim against the insurance company, insurance broker or insurance agent. Property owners who paid an extra premium for guaranteed replacement cost or extended replacement cost coverage, underinsurance should not face this problem. But those who purchased an actual cash value or replacement cost policy will likely not recover the actual cost of repair from their insurer. Here are the most common property policies and what they cover:
Actual Cash Value Policies. In cases of total loss, these policies generally cover the fair market value when the loss occurred or the policy limit, whichever is less. Insurance Code § 2051(b)(1).
Replacement Cost Policies. These are intended to compensate the policyholder for the shortfall in coverage that results from rebuilding under a policy that pays only actual cash value. Fire Insurance Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 462. These policies cover replacement cost, up to the limit.
Extended Replacement Cost Policies. For an additional premium, these policies provide payment of up to a specific percentage or a specific dollar amount above the policy limit. Insurance Code § 10102.
Guaranteed Replacement Cost Policies. These policies provide payment for the full cost of repair, rebuild or replace the damaged property, without regard to the stated policy limit. Insurance Code § 10102(e),(f).
If, at the time you purchased the policy, your insurer, agent or broker under-estimated the cost of repair in setting your policy limit, they may be liable for the shortfall. The law governing insurance agents and brokers is complex. If you sustained an underinsured loss from a wildfire, contact an attorney.
Recovering from your insurance company for destruction of personal property usually involves five steps:
- Make a claim for damage to your personal property;
- Complete whatever sworn proof of loss and/or the personal property inventory your insurer provides. Providing an inventory of your burned personal property is the hardest and most time consuming part of a fire claim.
- The insurer will make an initial payment of the “actual cash value” of the property. Actual cash value is synonymous with fair market value. Used furniture and clothing frankly isn’t worth much. But insurers generally use depreciation schedules to determine the fair market value of, e.g., a ten year old couch. Depreciation schedules typically result in the payment of an amount greater than what you could have received in a sale of the item.
- Replace the destroyed property;
- Provide the receipt to the insurer to receive the difference between what you spent and what the insurer already paid. Note that you will generally have 24 months from the date of a wildfire to replace your personal property. Insurers may, but are not required to extend that limit.