01/20/2025
Catastrophic Loss? Property Insurance Anxiety?
With family and friends feeling overwhelmed by insurance decisions, we feel grateful to be able to offer assistance. We have many years of experience in insurance recovery and provide some guidance on how to pursue and preserve rights in case of catastrophic loss.
In the case of a catastrophic property loss, you may need to seek legal advice because this is a complicated area of the law and there are a number of issues and pitfalls that can significantly affect the existence or amount of recovery under an insurance policy. Not surprisingly, insurance companies are not in the business of assisting you in maximizing your recovery. The right attorney can analyze various issues that could greatly impact your insurance recovery, and, if necessary, advocate for you to maximize protection under your insurance policies. You should not have to pay for an initial consultation.
Where do I start? (checklist)
• Take Care of Yourself, Family, Pets & Business
• Take Care of Your Property
• Get Complete Copies of All Insurance Policies
• Give Notice & Request an Advance
• Be Aware of Deadlines Including Proof of Loss Deadlines
• Gather Documents & Records
• Be a Good Listener & Cooperate
• Get Help When You Need It
• Take Care of Yourself, Family, Pets & Business: Find temporary housing—your homeowner’s insurance policy should provide for additional living expenses (ALE), and temporary housing in a similarly sized home in a similar type of neighborhood should not be unreasonable. However, keep in mind that your policy may contain limits on this coverage. Every expense from the time you leave your home (lodging, food, gas, clothing, supplies, etc.) may be reimbursable as out-of-pocket costs while you are displaced, so keep a detailed record of those expenses. Even if friends and family are putting you up, compensation at reasonable rates should be accounted for. As to your business, commercial property insurance “extra expense” coverage applies to the additional necessary and reasonable expenses incurred while continuing to operate during the restoration or repair process after a loss occurs and may cover the costs of a temporary location. There is often a debate about the “physical damage to property” required to trigger these business interruption coverages, but ordered evacuations coupled with smoke damage should be enough.
• Take Care of Your Property: Insurance companies typically must reimburse you for all reasonable costs to protect your property including payments for temporary repairs or board-up. Do not perform any extensive or permanent repairs or debris removal until after the insurance company has approved the work – typically after they have assigned an adjuster to your claim who has had the opportunity to inspect and assess the damage. Your policy likely contains a “no voluntary payments” clause which generally prohibits you, except in emergency circumstances, from making payments without the insurer’s approval. However, if there is an emergency, do not hesitate to act; just make sure you document the conditions necessitating emergency work.
• Get Complete Copies of All Insurance Policies:
-Residential Homeowner’s or Renter’s insurance policy
-Fire Insurance policy
-Jeweler’s (also called an inland marine policy)
-Automobile Insurance policy
-Excess, umbrella or commercial property/auto policy (in the case of a business claim) that may provide coverage
California law requires your insurer to provide you with the policy free of charge within 30 days of your request. You may be able to get “specimen” copies and a “declarations page” more quickly that can give you a general idea of your coverages but you will still need complete copies of all relevant insurance policies to understand all of your rights and obligations. It is important to request full copies, as frequently you are only given incomplete or “renewal” summaries.
• Give Notice: First, you must give proper notice to your insurance companies. Your insurance policy contains the required methods for doing this, but frequently in catastrophic losses, you may not have easy access to your policies. If that is the case, ask your broker or agent in writing to provide notice to all applicable insurance companies. Consult your emails and texts and do the best that you can with the information you have. You do not need to be specific (and shouldn’t be) about the cause, nature and extent of your loss and damages. Once put on notice, the insurance companies have a duty to investigate – and the specifics as to cause, nature and damages will be worked out as part of that investigation. But if you do not give prompt notice the insurance company may deny your claim. If you can’t locate the proper contact for giving that notice, the California Department of Insurance has a list of contact numbers for residential insurers here. Make sure to get written acknowledgement from your insurer of the claim reporting, along with a claim number to be used on communications, and the contact information for the adjuster assigned to your claim.
• Be aware of Deadlines: Unless you have a written waiver of any deadline, consider them binding. The failure to meet the deadline on proof of loss submission, statute of limitations for filing suit, deadline for commencing reconstruction, and others can result in the loss of rights to recovery.
• Gather Documents and Records: Gather pictures and videos of your property and its contents to document your claim. You may also ask family and friends if they have any photos or videos in and around your home or business that could assist you in this documentation. Collect past building plans, renovation records and past expenditures as to personal property lost or damaged. Prepare an inventory of damaged or lost property. The California Department of Insurance provides a home inventory guide that can assist you in creating an inventory of your contents and values to submit in support of your claim: DOI Home inventory guide. Take notes of all oral communications with your insurer, including telephone conversations and in-person discussions, and retain all e-mails, or other written correspondence.
• Cooperate: You have a duty to cooperate with your insurance company – but you do not have to agree to every condition imposed. Insurance companies “reserve their rights” and you should as well. If they ask you to agree to something that you do not understand or sign something, seek counsel first before signing.
• Proof of Loss: At some point your insurance company is going to request a “Proof of Loss” or “Examination under Oath” to finalize your claims and the extent of your loss. This is something that has time limits and it is also something you need to be very careful about. Most property insurance policies require that an insured provide a “proof of loss, signed and sworn to by the insured,” including statements of the time and cause of the loss; the interest of the insured and others in the property; the actual cash value of the property damaged or lost; all encumbrances on the property; and other information. These proofs of loss usually must be submitted within 30 or 60 days after the insurance company requests a proof of loss. Get an extension if you need it and respond to your insurer’s investigation.
• Request for an Advance: Sometimes you only get this if you ask, even where your policy allows for it. The first payment you receive from an insurer is often an advance payment and not a final payment. You may also receive ongoing payments. In either case, be sure to understand what the payment does and does not cover and be wary of initial settlement offers that are represented as full settlements and require a release of liability.
• Be a Good Listener: Oftentimes there is a process dictated by your policy that may not be fully aligned with how the insurance company actually operates. While being fully cooperative often gets the best results, it can also be used against you, so be alert to coverage defenses, adjustment issues, and timing requirements as your claim progresses.
Common Coverage Provisions and Considerations
• Coverage Amounts Can Greatly Vary: There was a proliferation of sub-standard out of state property insurers that came into the California market after some major carriers pulled out. In addition, when you purchased a policy, you had to choose either “actual cash value” or its “replacement cost” coverage. If your policy covers the actual cash value, the insurance will only pay the current market value of the damaged property, taking into account its age and wear and tear (depreciation). In contrast, if the policy covers the replacement cost, the insurance will pay to replace damaged property at today’s market price, without deducting for depreciation – but only if you actually replace. Insurers will often do a rough calculation of actual cash value and make an initial claim payment in the amount of that value. The replacement cost value will be determined later and will require the policyholder to diligently go back-and-forth with the insurer to prove the value of the property and challenge any low valuations the insurer proffers. You may have to actually replace the items to obtain full coverage.
• Additional Coverages: Homeowner policies provide coverage beyond the structure of a home and this is where the specific terms matter. There is usually debris removal coverage and coverage for the cost of a rental during the period of repair or replacement, which can sometimes be very lengthy. In addition, most policies provide for alternative living expense coverage which can be applied even to a new location not in the general area.
• Lender Loss Payable Provisions: Properties with mortgages may need to pay off their loans with insurance proceeds. In these cases, you will need to work with the lender to have the insurance proceeds issued on a “jointly payable” basis and create a construction escrow account to cover rebuilding costs. Your lender should be on your call list as you also may get mortgage payments suspended – otherwise you will need to keep paying your mortgage.
• Limitations on Cancellations of Coverage: On January 7, 2025, Governor Newsom proclaimed a state of emergency covering Los Angeles and Ventura counties due to the Palisades, Eaton, and other fires. Due to the Governor’s January 7 declarations, no insurer can issue a notice of cancellation or non-renewal due to wildfire risk for one year, starting on January 7, 2025, for any policy of residential property insurance in the ZIP Codes affected by the fires, listed here: DOI search engine .
• California Fair Plan (CFP) policies: Policyowners can report their claim on the CFP website. CFP provides some basic protections, and property owners will need to look for umbrellas, difference in conditions, or any additional insurance they may have purchased to cover portions of their losses. It has also been reported that this plan is significantly underfunded.
• Public Adjusters Can Be Expensive: We recommend exercising extreme caution before retaining a public adjuster. Public adjusters typically charge a percentage of the claim settlement for their services. Make sure you understand fully what they are charging and the services you will obtain before signing a public adjuster contract. On large claims, it may make more sense in terms of net recovery to hire a qualified coverage attorney on an hourly fee basis rather than a public adjuster on a percentage basis. You can also try to settle your claim directly with your insurer before hiring a public adjuster or an attorney but appreciate that the person on the other side of the call settles claims every day and has much more experience than you.
You may also consider contacting your local and state bar associations lawyer referral programs and legal aid services in your area to find an attorney who practices in catastrophic property loss insurance recovery.
You may also schedule a consultation with the author of this article:
David Klevatt
Klevatt & Associates, LLC
[email protected]
www.insurancelawyer.com
www.chicagolaw.biz
