Fire Insurance: Residents Need to Consult Their Agents to Learn What Is Covered by Their Policy

Officials examine sites in the Woolsey Fire to make sure there are no issues with gas lines .

Pacific Palisades residents have heard horror stories about numerous Malibu residents, who are still not in their homes a year after the 2018 Woolsey Fire. That couldn’t happen here, could it? Residents have insurance, correct?

Then, the October 21 Palisades Fire resulted in evacuations, and damaged several homes on the rim of the canyons above Palisades Drive. A week later, the Getty Fire broke out, and resulted in additional mandatory evacuations in the Palisades.

The brush in the Santa Monica Mountains that border Pacific Palisades has not burned since 1978 and people are concerned that when a large brushfire does reach here one day, many homes will be destroyed.

And it is not only residents who are worried, but also insurance companies.

On Nextdoor Palisades, one Palisades woman wrote that after the Gettty Fire, her insurance had been cancelled.

According to an August L.A. Times business column by Michael Hiltzik (“California Fires Will Result in Higher Insurance Rates for Homeowners”),  almost 19,000 homes were destroyed last year, resulting in more than $12 billion in insurance claims.

A story in the Press Telegram (“This Is How a California Wildfire Can Change Your Homeowners Insurance Rate”) said that some Southern California residents have seen their rates skyrocket because of wildfires.

The story noted, “Insurance companies in California use a system called FireLine from Verisk Analytics to determine the potential risk to insured properties. The system evaluates the fire risk to a property based on three factors:

  • Fuel — Grass, trees or dense brush can feed a wildfire.
  • Slope — Steeper slopes can increase the speed and intensity of a wildfire.
  • Access — Limited access and dead-end roads can impede firefighting equipment.”

Thousands of homes in Pacific Palisades fall into all three of those categories. The article added that those who live in extreme high-risk areas and have lost their insurance can get bare-bones fire coverage through the California Fair Access to Insurance Requirements (FAIR) plan.

FAIR was created in July 1968 following brush fires and riots in the 1960s. It is an insurance pool established to assure the availability of basic property insurance to people who own insurable property in California and who have been unable to obtain insurance in the voluntary insurance market.

If your home burns in Pacific Palisades, your insurance will cover the cost of rebuilding, correct?

In a CNBC report (“What does fire insurance cover?”), J. Robert Hunter, who is director of insurance at the Consumer Federation of America, said: “If your whole house burned down, it used to be that you had guaranteed replacement. Insurers started to rethink this and apply an absolute limit on what they will pay.

“A replacement cost of your home covers the cost of a damaged home with a similar home, but some insurance companies can limit that at 20 percent over the face value of the policy.

“This can be particularly problematic in a largely damaged area, which can result in an uptick in prices,” said Hunter, who added that insurers may also not cover additional expenses of ‘bringing your damaged home up to new building codes.’”

When I spoke to Malibu residents, they suggested two areas of insurance to examine: debris removal and loss of use.

I visited with Trish Bowe at her State Farm office on Via de la Paz to ask, “If my home here is destroyed, what insurance would insurance cover?”

The 1978 Fire raged in the Santa Monica Mountains above Palisades High School.

Bowe said that after the Getty Fire, she fielded numerous calls and she recommended that people should go over their insurance policy every year or two. “People see their doctor or dentist regularly and they should think of insurance as your financial health,” she said.

She told Circling the News that the first step is to determine how much it would actually cost to rebuild our home and if there would be enough insurance to cover it.

State Farm’s Vincent Guarino determined the size, the flooring, the roof, any interior cupboards, the plumbing, heating and air conditioning and came up with a number for the cost to rebuild our present residence.

A retired attorney with more than 25 years of insurance experience as in insurance defense lawyer, Guarino has a Chartered Property Casualty Underwriting credential. Prior to his law career, he spent several years as an insurance adjuster in auto claims and fire and casualty claims.

Generally, whenever you rebuild from a natural disaster like a fire or an earthquake, “The replacement cost will be higher,” Guarino said, “because to replace an existing structure, it will have to be brought up to the latest codes.”

Unless your 1952 house has the appropriate door handles and ADA access, the new construction could result in a 50 percent upgrade.

The kinds of “finishes” in your home–wood vs. carpet, granite vs. tile–will also determine the amount of money per square foot, it will cost to replace. I discovered that our current policy provides for $292 per sq. ft. to rebuild, which is low by today’s building standards in Los Angeles.

Debris clearance involved removing the remains of the home, such as boards, pipes and wiring, before building can start. If you have an older home, you may have had asbestos, which must be disposed of in a special process.

Debris was covered under the building upgrade, which was part of the policy.

One’s policy should also included coverage for personal property, which includes replacement for furniture, clothing, bedding and dishes. If one has antiques, paintings of value and jewelry, or anything worth more than $30,000, one should consider covering that under a separate policy.

Finally, the policy should have “loss of use” coverage, which provides two years of living in a like environment. “We’re finding that one year is not enough time,” Bowe said.

After watching Malibu residents filing for insurance payments, collecting these payments, finding an architect, going through the City permitting process and then actual construction, Bowe seems to be correct.

Times columnist Hiltzik warned people that “Steve Nielsen would not normally have considered himself a resident of California’s wildfire zone. But that ended in October 2017, when a fire swept through Coffey Park, his suburban Santa Rosa neighborhood, destroying his home and those of about 1,200 neighbors.

“Nielsen says his insurer, State Farm, canceled his homeowner’s policy last spring, on the grounds that there was ‘no longer a residence at the address they were insuring,’ he says. That means coverage for expenses such as rent at his temporary quarters is ending.

“He also has discovered that his policy has left him short by about $60,000 of the full cost of rebuilding his home, due in part to a dearth of available construction labor in the rebuilding area.”

After the Getty Fire evacuation, one Palisades resident said that when they evacuated, they ran out without a copy of their fire insurance but figured that the insurance people would know. It is up to do you to call, give the agent a claim number and file.

The CNBC report recommended that homeowners (and renters) shoot a video of their belongings. That image and claims (and claim numbers) could be kept on a computer drive or in the cloud, so that they are available from anywhere.

Finally, follow Bowe’s advice: Make an appointment with your insurance agent and see exactly what coverage you have.

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