The nearly three-hour discussion covered wide-ranging topics among panelists Amanda L. Riddle of Corey Luzaich De Ghetaldi & Riddle LLP, Stacy Monahan Tucker of Monahan Tucker Law and Kramer Trial Lawyers’ John Torbett, David Paletz and Daniel Kramer.
The panelists kicked off the discussion warning that victims of the Southern California fires — including the ongoing Palisades and Eaton fires — should be skeptical of anyone telling them they must hire an attorney or public adjuster quickly, particularly since some adjusters and attorneys have been walking around shelters and other places where fire victims have congregated seeking work.
“The very fact that they’re trying to do that is a very good indication that they’re not somebody you want to be working with,” Tucker said.
Beware of Scammers and FEMA Rules
The panelists noted that public adjusters should only be hired further into the insurance claims process as a “last resort,” if a policyholder is running into obvious trouble with their insurer, because adjusters take a portion of any insurance payout, and although that portion is usually around 5%, some have been asking for 15% to 20%, according to Tucker.
The panelists also noted that some attorneys are claiming fire victims must sue right away, and although some lawsuits have already been filed, there’s a three-year statute of limitations of property damage claims and a two-year statute of limitations on personal injury claims, so they have time to find legal representation. And, the panelists said, it will take years to litigate any claims.
“Don’t rush into something because somebody scares you,” Paletz said.
Instead, fire victims should focus on filing claims with their insurance companies and documenting losses and displacement expenses over the coming weeks.
The panelists warned that most policyholders are likely underinsured and won’t receive enough money to fully rebuild, but they repeatedly warned policyholders not to take Federal Emergency Management Agency funds.
“FEMA cannot help you with losses covered by insurance,” Riddle said, adding that’s true even if a policyholder has a high deductible.
Although FEMA provides coverage for uninsured and underinsured fire victims, the government doesn’t clearly define what it considers underinsured, and in many instances FEMA will demand money back if the agency learns a fire victim has any kind of insurance, panelists said. In those instances, policyholders could not only be forced to return FEMA funds, but they can also be charged with a misdemeanor, panelists said.
“And when FEMA comes to you and asks for the money back, it does not ask nicely,” Riddle said. “They come back at you saying, ‘You defrauded the federal government by taking funds you should have not.'”
Any fire victim who is insured and has already received FEMA funds should immediately notify and disclose their insurance policy to FEMA and document their communications with FEMA, the panelists said. Riddle also noted that FEMA funds cannot be used to pay for items that were funded by GoFundMe or other donations.
If a fire victim has any questions about whether they qualify for FEMA payments, they should meet a FEMA representative in person, the panelists added.
“Be 100% transparent about what your coverage is,” Paletz said. “You don’t want to mess around with it — they will charge you with misdemeanors — and get it all in writing.”
Tips on Submitting Insurance Claims
Anyone whose home has been damaged by the fires, regardless of the extent of the damage, should immediately file claims with every insurance provider they have, including policies for auto insurance, homeowners insurance, business insurance, renters insurance and boat insurance, as well as supplemental insurance, according to the panelists. That’s because some policies have unusual provisions that may cover some losses, they said.
Once a claim is filed, insurance companies are legally required to respond within 15 days, and that’s true for any questions a policyholder might have, according to Riddle. The insurance company will then assign the policyholder an insurance representative, and if an insurance provider isn’t responding timely, fire victims should tell their insurance agent who sold them their policy, because they tend to have clout and can speed up the process, Paletz said.
Displaced policyholders should also be sure to update their contact information with their insurer as soon as possible, and anyone without a mailbox should open a post office box that they can use consistently for the years to come as they go through the insurance claims process, the panelists said.
Once assigned an insurance representative, policyholders should also request copies of all policies, which comes with a one-page declaration that summarizes key policy terms and limits, and any riders or endorsements, which serve as add-on coverage, panelists said.
Once a policyholder is assigned a claims representative, the policyholder should store their insurance representative’s name, email and phone number, because that individual will serve as a “go to” contact for any questions, Riddle said, but she warned that those representatives may not always be helpful.
“They often push back, they often act as your adversary,” she said. “Do not let them forget that you have a contract with them. They must treat you in good faith, and they must treat you fairly.”
Tucker added that there’s no educational requirement to work as an insurance representative, and each representative is usually assigned hundreds of claims. They’re oftentimes not located in California, so they may be unfamiliar or surprised with certain cost-of-living expenses or prices that policyholders may submit for reimbursement, Tucker said.
After receiving the claim, insurers have 40 days to either accept or reject a claim, but insurers can inform policyholders if they need more time or if they need more information, Tucker said.
Tips on Understanding Insurance Policies
Once they have a copy of their policies, policyholders should read them and write down any questions to ask the insurance representative, according to the panelists.
There are four main categories of coverage under a typical homeowners policy: dwelling coverage; coverage for “other structures” — like detached garages, septic systems, sheds, gazebos and hot tubs; personal property coverage; and “loss of use” coverage for living expenses when a homeowner is displaced, according to the panelists.
Riddle noted that there may be questions about which section of the policy certain items — like a pool — fall under, and insureds should ask their representative to clarify the policy in writing.
The panelists repeatedly underscored the importance of documenting all communications with insurance representatives, and Riddle suggested that if a company requires policyholders to communicate via an app on a smartphone, or through an online portal, policyholders should screenshot and store all exchanges in a file on a smartphone or computer so that they have their own record of the discussion in case it’s inaccessible after logging out of the app or online portal.
The panelists also noted that fire victims should retain itemized copies of all receipts from restaurants, hotels and any living expenses as they navigate the claims process, and take pictures of the receipts in case the ink fades over time.
What to Expect From Insurance Payouts
Insurance companies are required to provide policyholders at least four months of displacement expenses up front for homes that are a considered a “total loss” or uninhabitable. Insurers calculate that amount based on the monthly fair market value of the dwelling, or how much it would cost to rent your home for a month if it hadn’t been damaged, according to panelists.
Even if policyholders displaced by the fires have already filed a claim and received a displacement expense payment, they should still document their ongoing expenses in case they need coverage beyond the alotted four months, the panelists said. Panelists also recommend signing a rental agreement with family members or friends who they may be staying with so that they can point to it if they seek reimbursement for utilities or other expenses, they said.
The panelists noted that Gov. Gavin Newsom declared a state of emergency, so in the event of total loss, an insurer must also offer policyholders an up-front payment of no less than 30% of the policy limit applicable to the dwelling for all personal property destroyed ‘— up to a maximum of $250,000 — without requiring the insured to file an itemized claim form documenting the personal belongings that were destroyed in a disaster.
Some policyholders prefer to take the 30% payment due to the emotionally taxing process of accounting for everything lost, the panelists said. And even smoke-damaged properties can recover between 75% and 100% for personal belongings destroyed, they said.
However, if policyholders prefer to itemize their personal property losses, they should create spreadsheets of those losses, which can be divided into categories like clothing, electronics and furniture, and use pictures and any receipts that they can access to support their loss estimates, the panelists said. The panelists recommend that policyholders creating such lists visualize each room, look at old pictures and talk to friends to create an accounting of all their destroyed belongings, but warn that it can be a triggering process.
Panelists also noted that policies have different time limits on the number of months a policyholder can take to rebuild or repair a damaged home. Policies also may have different provisions determining whether the insurer will reimburse a policyholder for destroyed personal property based on their actual cash value, which could be subject to depreciation, or replacement value. Anyone submitting claims should be aware of those terms and ask a representative for clarity if a provision is unclear, they said.
The panelists noted that insurance companies are also currently prohibited under a one-year moratorium from canceling insurance policies in the fire zones, but companies may rescind coverage for other reasons, such as if the insurer discovers a misrepresentation, like if a policyholder isn’t the official owner of the destroyed property, or if structures were built on the property that weren’t disclosed to the insurance company.
Anyone returning to their homes to assess damage should wear steel-toed boots, masks and take necessary safety precautions, because the soil is likely contaminated with toxic chemicals. The panelists added that the U.S. Army Corps of Engineers will likely scrape any destroyed lots to remove toxins before homes can be rebuilt.
Throughout the discussion, panelists warned that fire victims should be prepared for a lengthy, emotional process, and while they should document everything, they should give themselves some grace.
“Pace yourself, take breaks,” Riddle suggested. “You’re running a marathon here, not a sprint.”
–Editing by Michael Watanabe.
For a reprint of this article, please contact reprints@law360.com.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.