They spent a recent Saturday creating detailed lists of the contents
of their houses – everything from dishes and bed linens to socks and
unopened tubes of toothpaste. When memories failed, they turned to each
other’s lists to jar their recollections.
It was a long and emotional process, but necessary because many
insurers require meticulously itemized lists before paying the maximum
amount allowed by each homeowners policy.
“It’s just a nightmare,” Nancy Garcia said. “You get mad at the
insurance company for forcing us to do this.”
Insurers and property owners have settled about 36,000 of the
roughly 39,000 claims that resulted from the October 2007 wildfires.
Insurance companies have paid out about $2.3 billion, said Candysse
Miller, executive director of the Insurance Information Network of
California, a Los Angeles-based insurance group.
Of the 3,000 claims that remain open, several hundred involve
disputes between residents and insurers, said state Insurance
Commissioner Steve Poizner.
The reason for some of those disagreements is a familiar one –
homeowners were underinsured.
But state regulators and insurance industry officials said the
level of inadequate insurance coverage among 2007 wildfire victims pales
when compared with the large numbers of underinsured who lost homes in
the 2003 Cedar and Paradise fires in San Diego County.
Regulators and insurance agents have speculated that many people
updated their homeowners policies after learning about the
underinsurance problems stemming from the 2003 blazes.
“For about two years, they heard from firefighters, insurers,
activists, attorneys and) politicians about preparation and recovery,”
Consumer advocates working with fire victims in San Diego County
see things differently.
“We’re fighting the underinsurance battle again,” said Amy Bach,
executive director of United Policyholders, based in San Francisco.
“It’s still a super-serious problem.”
The nonprofit group, which educates disaster victims and others
about home insurance issues, conducted an unscientific survey on the
issue last spring. Among the 188 victims of the 2007 fires who answered
questions about underinsurance, 139 of them said their policy limits
didn’t cover the full cost of repairing or replacing their homes.
Last month, United Policyholders held a meeting in Rancho Bernardo
that attracted about 100 fire victims from the area, Bach said. “When
one speaker asked how many people were underinsured, every single person
raised their hand,” she said.
When Stephen Stout’s insurer offered him $332,000 to rebuild his
family’s four-bedroom home in the Westwood neighborhood of Rancho
Bernardo, he knew the amount was far below what he needed to do the
work. A few weeks later, his suspicions were confirmed when a consultant
he hired came up with a rebuilding estimate of $600,000.
After months of negotiations, Stout in April accepted his
insurer’s final offer of $485,000. He plans to make up the difference by
using some of the $245,000 he hopes to collect for the lost contents of
That leaves Stout with no room for error on the list of personal
items that he must complete by Oct. 22, the deadline set by his insurer.
He has identified 5,000 belongings.
To file an insurance complaint, call the California Department
of Insurance toll-free at 800) 927-4357 or visit insurance.ca.gov.
• Get an estimate on the cost of replacing your home from
sources such as AccuCoverage.com. The online service, which charges
$7.95, combines information you provide with data used by the insurance
• Compare that estimate with limits shown on the declarations
page of your insurance policy. You need to be covered for 100 percent of
the rebuilding cost.
• Make sure your policy covers “replacement cost” instead of
“actual cash value,” which covers only the value of your home’s contents
at the time they were destroyed. Even some “replacement cost” policies
depreciate certain items, so read your policy thoroughly for such
• Most standard policies limit coverage of valuable
possessions – such as jewelry, artwork and antiques – to $2,500. Buy
floaters or riders to adequately cover those items.
• Add an inflation-guard clause so your policy’s coverage
limits will be adjusted automatically each year to account for rising
construction costs in your area.
•If you own an older home, consider buying a replacement-cost
endorsement for your policy that will cover the added expense of meeting
current building codes.
• Make a detailed list of your possessions and take
photographs of rooms and closets. The Insurance Information Network of
California offers free inventory software at iinc.org. Click on the
• Your insurance policy’s limits for additional living
expenses need to cover rent and other costs for at least two years after
a total loss.
• Don’t be cheap. Spend as much as you can afford on your
policy, and don’t underestimate the value of your home’s amenities and
Sources: United Policyholders, Insurance
Information Network of California “We’re fighting for the contents,”
Stout said. “They’re making us itemize every toothpick, spoon and
As happened after the 2003 wildfires, plenty of finger-pointing
has ensued since last October’s blazes. Some homeowners said they were
never advised to increase their coverage limits, and some said they were
told their existing limits would more than pay for rebuilding.
Insurers and their agents said homeowners didn’t ensure that their
policies were up to date and failed to set their coverage limits high
enough to cover reconstruction costs.
State regulators now require insurance agents to take a course in
construction value concepts so they can do a better job advising
“It raises the bar for agents to understand the problem,” said
Peter Griffith, owner of C. Lee Williams and Associates, an independent
insurance agency in Kearny Mesa.
“But the bottom line is reconstruction cost evaluation is really
the responsibility of the homeowner.”
Even when coverage limits have been adequate, tedious and
time-consuming battles have erupted over other issues.
When an insurer offered Hector and Norma Lopez just under $5,000
to replace a metal staircase that burned in October with the rest of
their home in Rancho Bernardo, the couple balked.
“It was up to us to go out and figure out if it was realistic or
not,” Hector Lopez said.
The insurer’s offer was based on an estimate generated by a
computer program, but the Lopezes came up with a price of $50,000 when
they put the staircase out for bid.
“Finally, the insurer) ended up getting a bid for $40,000, and
that’s what they paid,” Hector said.
Although no major insurers have pulled out of areas affected by
the 2007 wildfires, some are trying to limit their risk exposure in
fire-prone areas by requiring policyholders to increase brush-free zones
around their homes or denying coverage for structures too close to the
edge of canyons, where fire dangers are higher.
Griffith said he represents one insurer that has dropped about 8
percent of its homeowner policyholders after re-evaluating their
properties’ risk for brush fires.
“In oversimplified terms, if you live on a hillside covered with
brush that is located in a geographic wind tunnel, you will pay more
for insurance) than the homeowner with a clay roof on flat lands with
well-maintained, defensible space,” said Miller with the Insurance
Information Network of California.
Poizner, the insurance commissioner, said his department is
committed to taking a hard line with with insurers that violate
regulations or throw up obstacles to block the quick settlement of
“I have and will continue to make it clear to insurance companies
that they must play by the rules,” he said. “I urge any consumers who
are facing these tough issues during
their recovery process to contact us. We review every single
complaint we receive and aggressively advocate for consumers whenever
But his department hasn’t pursued enforcement actions against any
insurer in connection with a 2007 wildfire claim. Such measures would
single out insurers publicly for regulatory violations and possibly
result in fines.
Poizner said his agency has focused on using mediation to resolve
conflicts between homeowners and insurers.
“If we find examples of claims that aren’t getting paid properly
and insurance companies not meeting their legal responsibilities, I will
use my full power as insurance commissioner to pursue cases,” he said.
Bach called Poizner’s approach “very disappointing.”
“We don’t see enforcement as a last-ditch effort. We see it as an
important tool to motivate insurers to address problems,” she said. “You
don’t motivate insurance companies by having meetings behind closed
doors. You motivate them by putting disputes) in the public eye.”