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How to Get Full and Fair Insurance Claims Payments in the Wake of California Wildfires

Washington, D.C. — The Consumer Federation of America (CFA) today warned consumers to prepare to file claims for damage resulting from wildfires and offered tips on how to get all you are entitled to out of the insurance company.

Most homes have homeowners policies covering fire damage, but insurers have been steadily imposing homeowners insurance policy limitations (discussed below). This shift of costs to consumers under homeowners’ insurance policies may take some by surprise, since disclosures are often buried in renewal paperwork that consumers may not understand or even read.  CFA urges homeowners dealing with fire losses to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement.

Tips for Consumers Filing Fire Claims

As consumers prepare to contact their insurance companies in the wake of the wildfires, CFA offered the following tips regarding the filing of a claim:

  1. You have paid your premium and are entitled to coverage. If you have a legitimate claim, do not hesitate to file it.  Insurers should not raise your rate for filing this claim or fail to renew your policy for filing it. Report your claim as promptly as possible as insurance companies generally handle them first come, first serve.
  2. Once your claim is reported, be sure to get your claim number and write it down. Insurance company claims departments can locate your file most promptly using your claim number.
  3. Maintain receipts for any expenditures related to immediate repairs you had to make to secure your home or any living expenses (hotel, meals) if you could not return to your home in the wake of the storm.
  4. When the insurance company sends out an adjuster to survey your damage, ask if he/she is an employee of the insurance company or an independent adjuster (I.A.) hired by them. If an independent adjuster, ask if they are authorized to make claim decisions and payments on behalf of your insurance company and ask for the name of the in-house company adjuster to whom the I.A. is sending your information.
  5. Many insurance companies have repair programs in which they offer to send out one of their approved contractors to estimate your property damage. You may wish to obtain an estimate from their contractor, but you are not under any obligation to use them. The insurance company may encourage their use, as it is to their advantage. Contractors that participate in these programs have likely agreed to unit repair costs dictated by the insurance company or one of their vendors. The unit repair costs are provided to insurance companies by software vendors and are averages by geographic region and may or may not fully compensate you for your damages. It is very important to remember that your claim is unique and should always be treated as such by your insurance company.
  6. Beware of fly-by-night contractors who might approach you to repair your home. Make sure the contractor has good references and is insured in case of errors in construction or a worker is injured on your property.  Check with the Better Business Bureau near you or with your insurance company if you are not sure about the qualifications of a contractor.

“Not all insurance companies handle claims badly, so go into the claims process with an open mind,” said J. Robert Hunter, CFAs Director of Insurance and former Texas Insurance Commissioner. “Be vigilant, though, and be ready to stand up for yourself and your family, or you run the real risk of being shortchanged.”

Keep Good Records

When you file a claim, you should immediately start a notebook documenting contacts with your insurance company. List the date, time and a brief description of every exchange. If you need to complain later, this information will be vital (see below). If an adjuster says he or she will come and does not, write it down. If an adjuster is rude, write it down.  If the adjuster is pleasant and efficient, write that down too.

Make as thorough a list of your possessions as you can. Use pictures of your possessions taken before the fire, and keep them in a safe place.  If you later realize you have no pictures when you file a claim, don’t forget that family or friends may have pictures of rooms in your house (for example, from Christmas or other celebrations) that can be helpful in recreating a list of your belongings.

You may wish to take your own photos of the damage as part of your documentation, if you can do so safely. Do not climb on the roof or in areas that might be unstable or otherwise dangerous. Leave that to the professionals. The adjuster should still take their own damage photos.

As noted above, you may be entitled to money up-front for living expenses, such as hotel costs and meals, if your home becomes uninhabitable as a result of fire damage. Keep receipts from emergency repairs as well as any costs you incur in temporary housing. These costs may be reimbursable under the “Additional Living Expense” portion of your homeowners’ policy. Insurers are usually very good about these initial payments. Most claims problems, if they arise, come later, when bigger payments are sought.

As you begin the claim process, if you are able, obtain a repair estimate from a trusted local contractor to use as a guide in talking with the adjuster.

What if the Claim is Denied or the Offer is Too Low?

If the claim is denied or you feel the offer is too low, demand that the company identify the language in your homeowners’ policy that served as the basis for denying your claim or offering so little. This approach has several benefits:

  • The company may be right and you may not know it. Once they pinpoint the appropriate language in the policy, you should be able to make this determination. For example, you may have $900 in damage, but the company could well point out that you have agreed to a $1,000 deductible.
  • The company may have slipped new limitations into the policy and not adequately informed you.  If you feel that you have been misled in this regard, it might be a good idea to consult an attorney. The practice of shifting the cost of previously insured events back to consumers may be acceptable, but only if consumers are clearly given the option to select the level of coverage they want with fully informed consent.
  • Another restriction new to many policies is a limit on replacement cost payments, which might come into play in the event that a home is totally destroyed. A typical cap is 20 percent above the face value of the policy (some companies cap at no increase over the face value of the policy). If costs surge because of the spike in demand for materials or labor from a major fire event this limit might apply. For example, if a home would cost $200,000 to replace and that amount was the limit on the policy, the insurance company would pay no more than 20 percent more, or $240,000. If the surge in construction costs due to extreme demand caused the price of replacing the home to jump to $300,000, the homeowner would be short $60,000.
  • If you find you have insufficient coverage to rebuild your home back to the way it was, ask yourself who it was that determined the amount of insurance you purchased. If it was suggested by you insurance company or agent and it turned out to be inadequate, you may want to seek legal advice regarding this situation.
  • Another new limit on policy coverage that might surprise you is many insurers no longer cover the cost of additional costs to bring a damaged home up to new building codes (wiring, elevation for flood risk, etc.)
  • Once the insurance company tells you the reasons for its action, it cannot produce new reasons for denying payment or making a low offer at a later time. You have locked them in—an important protection for the consumer.
  • If you review the policy and find that, under a reasonable reading, you think you are entitled to the full amount of your claim as you read the language they relied upon, you will likely win if you go to court. Courts consistently rule that if an insurance policy is ambiguous, the reasonable expectation of the insured party will prevail since the consumer played no part in writing the language of the insurance policy.

How/Where do I Complain if I Have Trouble on a Claim?

If you feel that the offer is too low or the claim denial is wrong, the best process for getting your complaint resolved is as follows:

  • Complain to more senior staff in the insurance company.  It is often best to complain to an executive in consumer relations (who is paid to keep consumers happy) rather than an executive in the claims department (who is paid to keep claims costs low). Use the records you have kept since the claim process began. The more serious the insurance company sees that you are in documenting how you were treated, the more likely they will make a more reasonable offer.
  • Complain to your state insurance department. All states will at least seek a response to your complaint from your insurance company, which will give you more information as you consider next steps if you are not satisfied with the response. California’s Insurance Department is known to be consumer friendly and should offer you even more assistance and may actually intervene on your behalf with the insurance company in clear cases of bad claims handling. It is important to dispassionately present your side of the story when you complain, using the notes you have been taking.
  • See a lawyer. Now the notes you took are even more vital. In addition to an award covering your claim, if your treatment was particularly bad, the courts in many states, including California, will allow additional compensation when the insurance company acted in “bad faith.”  Since insurance companies take your money in exchange for their promise to make you whole when disaster strikes, they must act in utmost good faith in performing that obligation.

Contact: J. Robert Hunter, 703-528-0062