Coloradans struggle to navigate insurance after losing a home to wildfire. State lawmakers want to make it easier.
Two Colorado lawmakers plan to introduce a bill that would shorten and simplify the insurance claims process after a declared fire disaster.
hree days before the East Troublesome fire obliterated more than 300 homes, Amanda and Craig Shindledecker left their house in Granby and drove to their other residence in Lakewood to escape the smoke. They made a plan when the fire started: If flames crossed Colorado 125, Craig would drive back to Granby to gather valuables from the house where they had been living during the pandemic.
When that fateful moment came, Craig drove back to Granby, where fire marshals told him to remain calm because the fire was not yet a threat to their house in the Trail Creek Estates neighborhood. But while he was retrieving their belongings, the sky turned orange. When he peered outside, embers were flying all around the house. He decided to leave, and as he drove away, both sides of the valley were on fire around him.
“He managed to save very little of what we had,” Amanda said last week. “He made it out OK, so that was the most important thing.”
The Shindledeckers lost about $350,000 worth of belongings in the East Troublesome fire on Oct. 21, 2020, the day the fire exploded across Grand County, torching about 100,000 acres in a matter of hours as it became one of the most destructive wildfires in Colorado history.
Losing their home was devastating, but the Shindledeckers were unprepared for the frustrations that would come next. More than a year later, they’re still entangled in the insurance claims process.
State Farm Insurance has paid out about $675,000 to the Shindledeckers so far, and they’re waiting to receive another $250,000. But by the time the claims process ends, they think they’ll have been reimbursed for only about half of what it will take to rebuild.
The Shindledeckers are not alone. More than a year later, many who survived the East Troublesome fire still have not been paid by their insurance companies, and that delay is slowing their rebuilding plans. Many fire victims who have been reimbursed by their insurers said they have received payments that did not come close to covering what was lost.
And some policyholders were so fatigued from “jumping through so many hoops” that they simply stopped participating and lost thousands of dollars they expected to receive, said Natascha O’Flaherty, a Granby attorney representing the Shindledeckers and dozens of other East Troublesome fire survivors.
Now, the Marshall fire victims who collectively lost nearly 1,100 homes in Boulder County on Dec. 30 are facing similar hurdles as they request payments from their insurers to help cover their losses.
To help stop the cycle, state Rep. Judy Amabile, a Boulder Democrat, and Sen. Bob Rankin, a Carbondale Republican, plan to introduce a bill that would shorten and simplify the insurance claims process for policyholders who lose their homes in a declared fire disaster.
The bill would build off of the 2013 Colorado Homeowners Insurance Reform Act, attempting to make it easier for people who lost their homes to gauge how much their insurance policies would cover and simplify the reimbursement process for people who lost possessions in a fire.
The legislation would also:
- Allow policyholders to decide whether to combine payouts from multiple burned structures and use it to rebuild a single home
- Attempt to make it easier for people to use the money from a burned property to build elsewhere
- Require insurers to cover out of pocket living expenses incurred while people are displaced from their homes.
Leaving money on the table
The legislation would also remove one of the most frustrating hurdles East Troublesome fire victims encountered: a requirement to document in excruciating detail all of the possessions they had lost before some carriers would make reimbursements. “I had 35 pairs of socks, they were X-years-old, to replace them costs Y, and here’s what condition they were in,’” O’Flaherty said.
“You literally had to put that level of detail in,” she said. “I don’t know if you could close your eyes and list everything that’s in the room you’re sitting in right now. You forget key stuff, and there’s some things – maybe it’s an art piece – that are hard to price. How do you deal with those pieces? So most of my clients spend hundreds of hours on that.”
The Homeowners Insurance Reform Act was passed by state lawmakers after hundreds of people lost their homes in 2012 fires, including Waldo Canyon and High Park, and has been revised several times since. It requires that, in the event of a total loss, insurance companies must immediately pay policyholders at least 30% of the content limit specified on the declaration page of their policy. If policyholders want to collect the remaining 70%, they must fill out a “contents list,” detailing all that was lost.
Some East Troublesome fire victims were so fatigued by documenting their possessions that they stopped midway and simply settled for the 30%, O’Flaherty said. Two of her clients accepted that amount. One had paid insurance premiums for 42 years, but gave up before finishing the list and the insurance carrier kept the remaining 70% of their contents coverage, which O’Flaherty said totaled $400,000.
If Amabile and Rankin’s bill passes, it would require that insurers immediately pay policyholders 80% of their contents coverage without submitting a detailed list. If policyholders want to collect the remaining 20%, they must still complete the inventory.
“I had hoped that the bill would read that it would pay out 100% of the contents. You’ve paid premiums for those contents. So, why wouldn’t they pay you that?” O’Flaherty asked.
Shindledecker submitted her contents list to State Farm in October, with thousands of items detailed. The list would have been longer, but she said she gave up because the inventory was consuming her life.
“Every day, I would drop my kid off at school, and I would come home and just sit all day and work on that list,” she said. “I mean, gosh. It was nine months, at probably 30 hours a week. It was all consuming – every drawer, every cupboard. Did I think of this? How many batteries did we have?”
The process seems intended to benefit the insurers by causing people “to leave money on the table,” she said. “It is really gut-wrenching, and it’s really, really traumatic to have to do it.”
Sevag Sarkissian, a senior public affairs specialist at State Farm, asked for Shindledecker’s name and claim number before providing comment for this story. When that information was provided, he said in a written statement that the company’s policy is not to speak specifically about any individual’s claim. “But we can tell you, with any covered claim, State Farm seeks to provide our customer(s) all the benefits to which they are entitled within the terms of the insurance policy.”
The cost to rebuild
When homeowners submit the list, most insurers enter each item into a system called Xactimate. The program calculates the value of the objects based on when they were purchased. The new bill would require insurers to disclose their methodology for determining the depreciated value of the contents listed.
Insurance company employees have entered mistakes into the Xactimate system, O’Flaherty said, and in those cases, the burden was on the policyholder to identify the errors. “They’re basically taking these policies and making them self-service. I don’t think anyone buys insurance expecting a self-service policy.”
The bill would require that insurers request any additional information about a policyholder’s contents list within 30 days of receiving it and would require insurance companies to pay the inventory claim within 30 days of receiving the answers.
The draft bill would also require that insurance companies come up with a reasonable, accurate and timely estimate of the actual cash value of the losses to the fire.
Some of O’Flaherty’s clients received statements from their insurers estimating the cost to rebuild in Grand County would run $111 to $225 per square foot. However, the Grand County Builders Association recently sent out a letter to insurance companies stating the cost to rebuild will likely be $400 to $800 per square foot, O’Flaherty said. “They came up with these bids that weren’t even remotely accurate,” she said of the insurance companies.
Shindledecker’s policy declaration said it would pay $469,000 for her home if it was destroyed. But she estimates it will cost anywhere from $900,000 to $1.2 million to rebuild the same house in the same spot.
She received the full $469,000 payment from State Farm six months after her home burned. But because she wasn’t sure if she would receive the full payment, Shindledecker was reluctant to hire a contractor, and because of labor shortages, work to rebuild won’t start until this summer.
As wildfires worsen, policyholders must pay closer attention
As wildfires become more prevalent, Coloradans can expect home insurance to become more expensive, and the burden will be on consumers to pay close attention to the coverage plans they’re buying, said Amy Bach, executive director of United Policyholders, a San Francisco nonprofit that helps people navigate insurance claims after disasters. The organization sent representatives to Colorado to help victims of the Marshall fire.
One of her organization’s top priorities is protecting policyholders from insurers’ adaptations in response to climate change, which has worsened fires and floods, she said. “Insurers got ahead of their customers in the sense that they very much saw this coming, because they study trends in the weather and everything.”
Insurance companies are “nipping and tucking” coverage in their policy contracts – in the wording and the legalese, she said. Customers now have less insurance and are paying more, she said.
“That’s been the mentality in the industry,” Bach said. “It’s business to them. But to the homeowners, it’s a lot more than business. It’s their homes, their lives.”
When coverage for the value of the home is determined, the homeowner can agree or disagree with the estimate, said Kelly Campbell, an insurance industry lobbyist, who worked on the draft bill with Amabile and Rankin. The homeowner would be required to provide documentation to the insurer if they felt they needed more coverage. Homeowners could call local builders to ask what it would cost per square footage to rebuild a home in their area, for example, to come up with the most accurate estimate, she said.
“It’s really important that folks are engaged when purchasing the insurance to make sure that they have the right amount of coverage. But then, one of the key components is, you have to keep up with it,” she said.
Homeowners should stay in contact with their insurance provider and conduct regular check ups to identify any need to increase their coverage, she said.
“Nobody really thinks about their insurance until something happens,” she said, “and so, that’s always one of the challenges.”
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.