Fire Loss Victims: Have You Been Paid What You are Owed?

Originally published in North Bay Business Journal

Like so many of us in the North Bay and across California, I lost my home to wildfire. We are incredibly grateful that we lost only material things, and we were able to escape unharmed But the experience of losing our home to fire, and the resulting journey it put us on, will remain forever imprinted upon us. Within the first hours of the 2017 Tubbs Fire, our home was in ashes, as was everything we owned, and we had nowhere to live.

But that was only the beginning of the new journey we were forced to embark on. Next came handling the bureaucracy, legalese, and paperwork of our insurance claim. And I considered us among the lucky – as I counsel my clients to do each year, we had recently evaluated our homeowner’s insurance policies and had the coverage we needed to cover this type of disaster.

Several of our Willow Creek clients also sustained substantial losses throughout the past few years of wildfires, and I want to share an experience that is, honestly, one of the most meaningful of my entire career as a Wealth Advisor.

New Insurance Rules

My clients who lost their home in the Kincade Fire were just recently awarded a significant amount of money due to the major changes just made to California law pertaining to residential property insurance. I was nearly brought to tears hearing from them and the relief in their voices that their insurance company would pay out their full policy, retroactive to the event. They thought the claim had been settled after they had purchased a replacement home earlier this year.

As you can imagine, their gratitude for this amazing outcome has made me practically want to shout from the rooftop of our office in Sebastopol that everyone who has experienced fire-related losses should check in with their insurer NOW and find out FOR CERTAIN  if they received all the money they are owed. It wasn’t until my clients shared the California Department of Insurance bulletin with their insurer that they were notified of this windfall.

So here is what you and any of your neighbors, friends, family, or loved ones need to know:

If you have experienced a total loss of property, there is now a loss settlement clause in the California Insurance Code stipulating that the insured can choose to rebuild at the same location, at another location, or purchase a home at another location. This includes payment of the building code upgrade cost or the replacement cost, including any extended replacement cost coverage.

Rebuilding Or Not?

What this means is that if you decide against rebuilding, you could still be owed your total policy limit. Of course, the amount owed depends on the specifics of your policy. It is crucial that you make sure you aren’t owed anything because your insurer likely won’t proactively make sure you get everything owed to you.

Another vital part of this new law states that insurers may not limit or deny payment of the building code upgrade costs, which means that the insurer must pay for the costs of code upgrades – like mandatory ceiling sprinklers, for example, in a rebuild. If you replace your home, your insurer may still cover code upgrade costs, so be sure to inquire with your insurer on this point.

I advise anyone affected by wildfires in California to check in with their insurer and specifically mention the bulletin from the California Department of Insurance (which you can find on their website, www.insurance.ca.gov) and find out if you have been paid everything that is owed. We further urge you to share this bulletin with your friends, family, and neighbors. I have personally witnessed a few cases where a significant amount of money was paid out. Though it will never erase the trauma experienced by fire victims, this is one way to make a terrible situation a bit easier to handle.

Some other key provisions of California law to be aware of. If:

  • Your insurance company is reducing coverage, the offer of the renewal must be issued 45 days in advance of the expiration date and state any reduction of limits or elimination of coverage.
  • The insurance company is planning to non-renew a policy, the notice must be issued 75 days in advance of the cancel date.
  • You cannot live in your home (due to restricted access by order of civil authority), additional living expense coverage will be provided for at least two weeks.

If you do suffer residential property loss, you should ask your insurer for a complete copy of your policy within 30 days and a list of items that the insurance company believes would be covered for additional living expenses. At renewal time, you must work with your insurer to adjust the policy limits and coverages to reflect what is needed based on the status of the reconstruction process.

Laws can be difficult to interpret, and each situation is unique, but these changes could affect you and dramatically increase what you’re able to collect from your policy.

With this year’s wildfire danger at an all-time high, it is crucial for all of us to be prepared for a difficult summer. Check on your policies, update your coverage, and know your rights. If you encounter any roadblocks with your insurer, reach out to an attorney or other trusted advisor.