- Insurance Companies Taken to Task Over Handling of California Wildfires
- November 20, 2017 | Author: John G. Roussas
- Law Firm: Cutter Law P.C. - Sacramento Office
The California Department of Insurance has issued a warning to home insurance companies, warning them that they must follow state law when it comes to handling claims related to the recent California wildfires. In a news release, the department notes that concerns have been raised that not all insurers handling fire claims linked to the California fires are compliant with state law, including making false or incorrect statements to policyholders. Unfortunately, if policyholders are not aware of the law or of their rights, they may believe false information, which could limit the compensation their home insurance company gives them.
Claims Adjusters Allegedly Violating California Fire Insurance Rules
The situation stems from the California wildfires that destroyed parts of the state, including Santa Rosa and Sonoma. On October 9, 2017, California Governor Jerry Brown proclaimed a state of emergency in several California counties. Following that, Insurance Commissioner Dave Jones declared an emergency situation and authorized claims adjusters who are out-of-state (not in California) and do not have their California license to adjust claims in the areas affected by the fires.
The purpose of the authorization was to allow claims to be processed more efficiently so policyholders could receive their initial payments more quickly. Unfortunately, according to the insurance commissioner, policyholders, public officials, and other stakeholders have issued complaints that some claims adjusters have given false and/or misleading information to policyholders.
Among the false claims made by claims adjusters were that policyholders have only between six and 12 months to collect their full replacement cost to rebuild. Under California law, however, any claims related to a "state of emergency" situation—which the wildfires were—have no fewer than 24 months.
Other incorrect statements included that policyholders would not receive full replacement benefits if they did not rebuild in the same location. In fact, under California insurance law, policyholders can rebuild on the same location, build in a new location, or purchase a home already built in a new location. Furthermore, some insurers reportedly claimed that the additional living expense benefit would expire in 12 months when it expires in 24 months during a state of emergency.
Although adjusters without California licenses can adjust claims linked to homes that were destroyed in the fires, those adjusters must still understand and comply with all state insurance laws.
California Department of Insurance Issues Formal Notice
As a result of the allegations made against insurance companies, the California Department of Insurance issued a formal notice, warning insurers of their duties under California law.
Helping residents start the claims process in the face of so many losses and claims necessitated extraordinary actions," said Insurance Commissioner Dave Jones in a press release. "While getting claims settled is a priority, it must be done according to the laws in place to protect policyholders through a difficult process. I issued this notice to remind insurers that claims adjusters must be properly trained and process all claims according to California law."
Unfortunately, many policyholders might not be aware of California insurance law or how it relates to their fire insurance claim. This may result in them agreeing to less compensation than they are entitled to or rushing to get a claim in too quickly without all the necessary documentation.
Investigation into What Caused the Fires Ongoing
In all, 43 people died and more than 8,000 buildings burned down in the wide-ranging California fires. Meanwhile, losses linked to insured properties are expected to run higher than $1 billion.The cost associated with fighting the fires sits at around $189 million, the Los Angeles Times reports.
Although officials have not yet released the cause of the blazes, wildfire lawsuits have been filed against Pacific Gas & Electric (PG&E), alleging the company was responsible for at least some of the fires, thanks to downed power lines and improperly maintained vegetation. More than 100 people are so far represented in around 15 lawsuits, claiming PG&E's actions caused the fires that damaged so many homes and businesses.
Both Cal Fire and the California Public Utilities Commission are looking into the fires, and the commission is also looking into whether any of PG&E's actions were factors in the fires spreading.
A complete investigation into the causes of the California wildfires and their spread could take a year or more, and with more than 100 fires started in approximately 10 days there is a possibility that the cause of some fires will not be determined.
PG&E Faced Fire Penalties Before
This is not the first time PG&E has faced scrutiny following a massive California fire. A 2015 fire that spread over 70,000 acres; destroyed 549 homes and 368 outbuildings, and four commercial properties; and killed two people was linked to PG&E's actions. Those actions included:
- Failing to note that the removal of two trees near an overhead conductor would allow a pine tree to come in contact with the conductor, which ultimately started the fire; and
- Failing to report to the California Public Utilities Commission that PG&E equipment was possibly linked to the fire within the proper time frame.
As a result, PG&E was fined $8.3 million.