Category: bad faith

Three key principles in total loss wildfire insurance claims 

If you suffer a disaster such as a total loss from wildfire and need to claim on your insurance, consider these three principles:

Get a copy of your policies and read them.

Insurance always starts with a written policy, so the first thing to do when you get ready to make a claim is to get a copy of any policy that might cover your damaged property and read it through from front to back.

If you do not have your insurance policy forms because they have been lost, destroyed or are otherwise unavailable, you will need to obtain a policy reconstruction from the insurance company. Ask your agent or go directly to the insurance company’s policy services department. If you cannot remember who your insurance company is, you will need to do a little detective work. Start with your checking account. A check of your bank records may well lead you to any insurer that could provide insurance coverage for your damaged property.

Check your coverages.

Your insurance policy covers certain types of losses and excludes protection for others. That’s why it is important to get a copy of the contract right at the start.

A problem that often occurs after a catastrophic loss is the damaged property is not fully insured. Where a broker or broker advises you professionally on appropriate coverage or binds coverage based on their own professional expertise, you may have a claim for professional negligence if the property is not insured to its full value.

Watch out for Time Limits

Property insurance policies generally have their own deadlines, known as “limitation periods,” and the period during which legal action must be filed to enforce the contract is frequently shorter than the period applicable to a simple written contract.

If in doubt, consult a lawyer about the time limits for your claim. Be proactive. Once you have suffered a loss, a clock ticks somewhere that could limit your ability to claim back the insurance benefits.

 

Additional living expense coverage basics for a total wild fire loss

A few words from Daniels Law partner, Bill Daniels:

When we had a house fire in 2009, our big problem was what to do with the horses.

We have lived on a small horse farm in the San Fernando Valley for about thirty years. My wife Cheryl is a serious animal person.

So when the fire burned down our house, it threatened to scatter our entire family and also all our pets and livestock.

The tally back then, if I recall, was a quarter horse gelding, two Arabian mares, a retired blind pony, two pygmy goats, three domestic cats, four Labrador dogs (two black, one brown and one white) and one domestic rat.

Imagine you are looking for a rental home to relocate this crowd and you have an understanding of the predicament we were in. Fortunately, we now had homeowner insurance that included basic fire protection. In addition to property damage services, there was something known in the insurance industry as “ALE.”

The ALE coverage is intended to reimburse you for the additional costs you incur as a cause of a damage. In our case it was the house fire.

In general, this includes things like rent for temporary furniture, pet boarding, moving costs, the extra cost of meals in restaurants when you don’t have room to cook and so on.

How much ALE coverage is offered depends on your insurance policy. Some policies have no monetary cap, which can help ease the pain if your assets do not fully contain what you have lost. Others have duration and dollar limits. They vary from case to instance.

Whatever the details, ALE can be a lifesaver during the reconstruction process, which can take many months or more than a year.

So if, after a fire during rebuilding, you ask every time you buy something, “Did we have to get this (whatever the item is) because we lost our house?” If the answer is yes, maintain the receipt and attach it to your claim.

Some folks will have a separate bank account to track their spending, which can make things a bit easier.

That’s because documenting what you spent on things that ALE covers can become incredibly important. If you have a dispute about how much the insurance company owes you, having good records can really help you out.

One strategy to make things easier is to arrange for the insurance company to pay you a lump sum upfront for a known price item, such as renting a rental property that is calculated to include enough money for the time you need to properly rebuild. This can reduce you the hassle of waiting for an insurance check each month, especially for certain items that you can not finance on your own.

In our case, we were a bit creative in solving the livestock situation. The fire burned down our main house, but a small guest house remained intact. So instead of evicting everyone from the property, we persuaded the insurance company to pay for a rented RV camper for the renovation, which took just over a year.

The RV camper gave us a kitchen, which we needed as the guest house has none. In addition, there was an additional bedroom for our daughter, who was still living at home at the time.

In the end, we had a win-win solution: my wife kept her herd together, the insurance company saved a lot of money on food and special rental apartments for people with animals.

The lesson we have learned is: be prepared to negotiate for your own benefit, but also be practical and reasonable.

Of course, this is a good recipe for life in general.

Hiring a contractor after a total wild fire loss in California

Probably the best tip we can offer on the contractor’s hiring front is to check a builder’s license or the registration of a home improvement vendor to see if the candidate you’re thinking of has problems in the past that could point to problems in the future.

The California Department of Consumer Affairs Contractors State License Board is a good place to start. This is a website where you can verify a contractor’s license online. Googling “Check Contractor License California” should transport you easily to the Board’s license check page, where you can search for license number, company name, personal name, etc.

Previous testing of a license can save many problems in rebuilding your property. We learned this the hard way after hiring a paver contractor years ago to repave a driveway. It was only after the contractor broke his contract and that we realized that we were not his first victim. If we had known about the license check website, it would have saved us a lot of trouble.

A license check also helps you avoid hiring an unlicensed contractor, which is a known hazard after catastrophic fire damage. Contractor licenses are designed to protect the public from unscrupulous souls; do not be tempted to ignore this protection. The state licensing office also publishes a checklist for homeowners to download and follow.

It asks for useful things like:

Have you received at least 3 local references from the contractors you are considering?

Did you call the contractor first or did they call you?

Will the developer get a permit before the work starts?

Have you read and understood your contract?

This contract is, by the way, an important part of the reconstruction process; a contract is a legal document, so read before signing and ask questions before committing yourself.

Some important points that belong in a contract for reconstruction are the time of commencement and end of the work, a detailed description of the work to be done, the material to be used and the equipment to be installed, any down payments required and a timetable for payments.

You should also receive a “notice to the owner” from your contractor describing liens and ways to prevent them.

The Licensing Committee notes: “Even if you pay your contractor, a lien can be transferred to your home by unpaid workers, subcontractors or material suppliers.

A lien can result in you paying twice or, in some cases, losing your home to foreclosure.

One final thought: after a disaster such as a wildfire, local contractors are in short supply.

Prices may reflect this fact, and rapid reconstruction may not be an option, given the facts imposed by supply and demand.

However, when selecting your contractor, make certain that the repairs and rebuilding are on a time line you can live with. Also, it is always good practice to walk the job every day, so your contractor knows you are paying attention to what they are doing.

Depreciation in total wild fire loss insurance claims

Some insurance companies will not focus on depreciation when dealing with forest fire claims.

This is good news. Depreciation is something most people don’t understand when they are buying insurance and they can make claims settlement, well, troubling.

Simply put, your home or business building and personal belongings – furniture, fabric, tools, etc. – can lose value over time because they age, show traces of wear, or even become obsolete.

This fall in value is called a “devaluation” by the insurance industry.

The concept becomes relevant when you make a claim because of the way in which most policies are written.

Generally, claim reimbursement begins with an initial amount for the Actual Cash Value (“ACV”) of your loss. ACV is the fair market value of lost or damaged items: Think of the price a willing customer pays to buy from a willing seller.

To avoid depreciation, most insurance companies sell replacement cost coverage that can allow additional money up to the full cost to remove any item.

The catch is that you usually only get a complete replacement cost benefit when you actually replace the missing or damaged item.

I have seen how people have dealt with this concept over the years, so it is worth taking a closer look at how the process works.

Calculating depreciation is usually a simple step in arithmetic.

Let’s say you lost a two-year-old flat screen TV that was in good condition before the blaze. A new, similar unit prices $1,000 in the store. This is the replacement cost or “RCV.”

A TV carries a life expectancy of five years, so it loses 20% of its value each year.

The depreciation calculation here is RCV minus 40% corresponding to ACV $1000 – $400 = $600.

This implies that the insurance company will pay $600 for the destroyed TV as part of a fire insurance policy. If there is substitute coverage, the carrier will send a check for the remaining $400 or $1,000 in total after confirmation of purchase.

The same simple measurement applies to most parts of your home or office that wear out over time. Think carpets, curtains, or roofs.

Each will have its own depreciation schedule. Some items will depreciate over long periods (25 years for a roof in most cases), while others lose quality relatively quickly.

The situation at the time of loss can also count, which usually occurs when the damaged item is not completely destroyed. A flimsy carpet that is smoke-damaged is a good example. Well, in serious events such as a wildfire, some carriers cut through the regular damage process because so many people are affected by the similar accident.

This implies, particularly where there is a total loss, your claims adjuster may not let you jump through the depreciation hoop.

The reason of all this is not to be afraid to ask your insurer to waive the depreciation step in your claim and either to cover the replacement prices directly or to pay the insurance limits separately.

You may be pleasantly surprised by the reaction and ease some of your stress as you recover from the fire.