Can I receive insurance money that exceeds my policy limits? Thomas Laborde asked 2 years ago
Can I receive insurance money that exceeds my policy limits?

Good Day,

I lost my home in the Glass Fire in September of 2020.

As you know, that is when the real estate market went crazy, the supply chain tightened, and commodity prices went through the roof.

  • Is it possible to receive payments that exceed my policy limits?
  • As a “rental property” (where we actually lived most of the time), our policy limit on contents was $20K. Legally, are we entitled to more than this?
  • I have extended coverage of 25% more than coverage for dwelling and other structures. Can I get this money regardless of whether I buy or rebuild?

Thank you!

1 Answers
Don A. Lesser, Esq. Don A. Lesser, Esq. Expert answered 2 years ago

I’m very sorry for your loss. Here are my answers to your questions as I understand them.

Question 1: No. The policy limits are the most the insurer has agreed to pay for each type of coverage your policy provides, and the most you can recover, even if your cost of re-building is more than that. When buying homeowners’ coverage, it’s vital to purchase a limit of coverage that will cover the costs of rebuilding your home in the future, including future increases in costs of re-construction. These increases can result from inflation but also from “demand surge,” which refers to the severe increases in construction costs that happen after wildfires when there are not enough qualified contractors and materials available to rebuild all the damaged or destroyed homes in the area. If your coverage is insufficient to cover your cost of re-building, unfortunately your only potential remedy is to investigate whether you have a claim against the broker or agent who sold you your policy. These claims are generally difficult because the law does not require brokers or agents to advise you regarding the coverage you need unless you actually ask for that advice and the broker/agent agrees to provide it.

Question 2: Probably not, though I would have to review your policy to give a more definitive answer. If your contents coverage is limited to $20,000 because the policy was designed to protect you as a landlord and not the occupant, the fact you were actually living in the home most of the time suggests your policy probably wasn’t the right one for you. You might have a chance at getting your policy “reformed” to provide more coverage if your application for the coverage disclosed you would be living at the property, or you can otherwise prove the insurer (or its agent) knew you would be occupying the property. You should start by asking the carrier to re-evaluate your coverage if you can show either of these things.

Question 3: Yes. Section 2051.5(c) of the California Insurance Code states that if your home was in an area in which there was a declared state of emergency, which yours was, you can use your extended replacement cost coverage, and your building code upgrade coverage, to buy another home. Keep in mind, though, that these coverages will be available toward your purchase elsewhere only to the extent those coverages are needed for you to re-build at the existing location. For example, if, in addition to your Dwelling limit, you would need $25,000 from your Extended Replacement Cost coverage to re-build the same home at your existing location, and you would have to spend $15,000 on code upgrades if you re-built, you would have $40,000 from those coverages to apply toward buying a home elsewhere. This would be all you could apply even if the total amounts of those coverages is greater than the actual costs you would incur to re-build.

I hope you find these answers helpful.