New California Law Increasing Insurance Coverage for Wildfire

29 Oct

Curtis Panasuk was forced to evacuate his home located in Ben Lomond (Santa Cruz County) California when the CZU Lightning Complex fires hit in August according to a recent San Francisco Chronicle article.  In the article he said he could hear dynamite-like explosions in the San Lorenzo Valley when nearby homes burned which caused their propane tanks to explode. 

While Panasuk was lucky, his home did not burn down, he was shocked when his claim for additional living expenses was denied by State Farm. Panasuk ran up 10 days’ worth of hotel bills when he was not allowed back into his home until the evacuation order was lifted. 

In their denial, State Farm claimed that despite the fact that he was required to evacuate his home and the fire destroyed 75 homes in the area, because it did not damage any property within a 1-mile radius of his home, they would not cover his additional living expenses. 

Additional living expenses coverage typically kicks in when a homeowner cannot live in their home due to damage making it unsafe or when a person is forced to evacuate their home due to fire or weather danger. The majority of insurance companies offer at least two weeks of additional living expenses that cover lodging, food and other expenses. 

Michael Soller, a spokesperson for the California Department of Insurance, said in the SF Chronicle article that the California Department of Insurance is unaware of any companies, besides State Farm, that deny additional living expenses claims unless there is damage within a mile (or any distance for that matter) of the home. 

SB872 was signed into law by Gov. Gavin Newsom on Sept. 29 and will require insurers in California to pay additional living expenses for at least two weeks whenever a civil authority issues an evacuation order that is related to a covered peril, during a declared emergency. The law also requires insurers to offer a two-week extension if the homeowner is still under an evacuation order. 

The new law takes effect on July 1st of next year.

According to the article, State Farms buried their 1-mile requirement deep in an attachment to their standard California policy. Under the Prohibited Use section of the policy it says “it will pay for additional living expenses for up to two weeks, beginning when a civil authority issues an evacuation order, as long as there is direct physical damage to any property, other than the property, within 1 mile of the customers home.” The damage must be caused by a covered peril listed in the policy.

This specific language has been in State Farms California homeowners policies for 10 years, said company spokesperson Sevag Sarkissian in the San Francisco Chronicle article. This language will obviously have to change once the law goes into effect.

Panasuk eventually spoke with a State Farm claims expert who told him that the CZU fire coming within a mile of his house was not required. Unfortunately, because his additional living expenses ended up being less than his $5,000 deductible, he was not reimbursed for those costs.  

State Farm ended up telling the California insurance department that despite the fact that the 1-mile radius clause is in their policies, they were advising their adjusters and agents not to deny these types of claims. 

When State Farm was asked if they were currently waiving this requirement for all California fire evacuees, Sarkissian replied in the SF Chronicle article, “Every claim is unique and handled based on the individual merits and that customers with questions about their coverages or claim are encouraged to reach out to their claim handler.”

SB872 also clarifies additional living expenses when a home becomes uninhabitable. Current law requires insurers to pay additional living expenses for up to 24 months, plus an additional 12 months if there is a good cause such as construction delays that are not the homeowners fault. There have been reports of insurers denying additional living expenses to homeowners when their homes were not destroyed or damaged but are without power or water.

On July 1st, insurers will be required to cover additional living expenses if the home is uninhabitable due to damage outside of the property, such as a lack of water or power. The law also states that if the house is completely destroyed and the homeowner decides to build a new home at a different location or buys a new home in a different location, the insurer must pay the amount that would have been recovered if they had rebuilt at the original location. 

Finally, the new law states that for any claim made on or after Jan. 1 for losses related to a declared state of emergency, insurers must provide homeowners with at least four months of additional living expenses in advance. They must also give customers in a declared disaster area a 60-day grace period for paying their premiums. 

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