California is way ahead of other states in protecting policyholders, particularly in the aftermath of disasters.
But policyholders are often missing out on these protections because many catastrophe adjusters who come in from out of state, and even some national insurance companies, are not informed.
Under California’s Fair Claims Settlement Practices Regulations, insurance companies are required to meet certain requirements in their communications with you, act in good faith, conduct cooperative investigations, and more.
Understanding your rights and asserting them to your insurer are critical in maximizing the protection you paid for.
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1. Collection – 24 Months of Full Replacement Value Benefits
Policyholders have a full 24 months to collect Replacement Value benefits owed over and above what they have been paid for ACA (actual cash value). This differs from the typical 180 days (6 months) that your adjuster may be familiar with. If your insurance policy provides for Replacement Value benefits, in California you have 24 months to claim and collect it. (See, California Insurance Code 2051.5(b)(1)
2. Buying or Rebuilding at a Different Location
Policyholders have the right to replace a destroyed home by buying or rebuilding at an alternative location. In California, if your insurance provides structure coverage, you are entitled to rebuild in another location or move altogether. The only catch here is that the measure of indemnity is based on replacement cost of the insured property and not the cost to repair, rebuild or replace at a location that is not the insured premises. See, California Insurance Code 2051.5(c)
This has been law since 2004, yet many adjusters working on the North Bay wildfires do not know about this law and have been disputing its existence. You, the insured must be prepared to be tenacious in requesting this right to the point of providing citation of The Code to your insurance company representatives.
Establishing rebuilding costs is a negotiation! It is up to the policyholder to reach an agreement with their insurance company on what it would theoretically cost to rebuild the exact same home that was destroyed. Policyholders are entitled to the complete package of documents supporting the insurance adjusters rebuilding cost proposal. This package must include all coverages for code upgrades and extended coverages that would be required for the hypothetical rebuild.
Once you reach an agreement you have the settlement basis that will allow you to rebuild in place, rebuild elsewhere or buy a new home.
Note, however, that the insurer will not allow a windfall. Meaning; the insured must show they will need to spend the full amount on buying or rebuilding elsewhere.
Generally the insurer pays full Replacement Cost once an agreement has been reached on the replacement cost of the insured home. However, the money may get deposited into a supervised construction account and doled out via progress payments. If you’re buying a replacement home, you should be able to collect full replacement cost as soon as you’ve given your insurer proof of the purchase and price.
3. Obtaining Copies of Claim File Documents
Law dictates that policyholders have the absolute right to obtain, upon request, copies of all claim-related documents. This includes all documentation that relates to evaluation of damages, repair and replacement estimates and bids, appraisals and all other valuation, measurement and loss adjustment calculations of the amount of loss, covered damage and cost of repairs.
The insurance company must comply with the request for documents within 15 calendar days of receipt. statute unique to California, Ins. Code 2071
4. ALE Coverage for a Minimum of 24 Months
Following a declared disaster, like the 2017 wildfires, under Ins. Code 2051.5(b)(2) policyholders are entitled to a minimum of 24 months of ALE (additional living expense) coverage. Although this does not increase the total amount of coverage stated in the policy, it does provide some breathing room to those who will need more than two years to get home.
5. Calculating Extended Coverage Amounts
You may be covered for Extended Replacement costs and a larger settlement adjusted for inflation.
Extended Replacement Coverage usually only applies to structure limits but in some cases, contents and other coverages may get extended.
Once you have done the math to apply the Extended Replacement formula to adjust the limits, then apply the inflation adjustment formula to increase those adjusted limits.
The starting place for policyholders should always be a certified, complete copy of the current policy. Insurance Code 2071 specifies that policyholders have a right to receive this no more than 30 days after requesting it.
- Piece together the endorsement, riders, special features listed on the policy’s declarations page and apply all formulae that increase the stated available maximum limits. This includes Extended Replacement Coverage and Inflation Adjustments.
- If you have an Extended Replacement Coverage apply it to the structure coverage limit and any other categories of coverage it may apply to.
- Apply the inflation adjustment formula to increase those adjusted limits.
Additionally, polices normally provide benefits for Building Code Compliance, Trees, Shrubs and Landscaping and Debris Removal often stated as a percentage of the limit on the structure. 10% – 15% of coverage A is typical of all three categories.
So unless the policy specifically says you can’t, calculate your maximum benefits for all three categories by using the adjusted Coverage A amount you worked out by applying the Extended Replacement and Inflation Adjustment.
- Other structures, like detached garages, storage sheds, and fences
- Furnishings, art, appliances, electronics, and other personal belongings
- Debris removal
WARNING: at a future unknown date, the Federal Emergency Management Agency (FEMA) or your local government may seek reimbursement for this expense if they perform the debris clean up activities.
- Additional Living Expenses, such as clothing, meals, and food
- Damaged or destroyed personal belongings
- Additional Living Expenses
Typically, landlords’ insurance policies do not offer benefits to lessees.
- Damaged or destroyed land, trees, and vegetation, including vines and other crops
- Damaged or destroyed property and outbuildings
- Injured or deceased livestock
- Revenue losses from lost business or an inability to conduct business
Northern California Fire Lawyers is a team of more than 30 attorneys from a coalition of three Northern California law firms:
Collectively, our fire lawyers have more experience investigating and bringing claims against PG&E than any law firm in California. Our attorneys have been appointed by California judges to leadership positions in some of the largest fire and disaster cases, including the Butte Fire Cases, 2017 PG&E Fire Cases, and San Bruno Explosion lawsuits. Our fire attorneys, Amanda Riddle and Dario de Ghetaldi, were appointed co-liaison counsel for plaintiffs in the coordinated lawsuits for the 2015 Butte Fire. In 2017, Mike Danko began a trial on behalf of six clients involved in the Butte Wildfire against PG&E; PG&E offered a favorable settlement to all of those clients within three days of the start of trial.