Altadena Fire Response-Insurance
With a Like-for-Like focus
Insurance
We are not experts and we are figuring out the insurance process as we go, similar to many of you, so please take this in good spirit and verify on your own. The Disaster Relief Center is a good resource as is your insurance Adjuster. What we have below is our own synthesis of what we understand taken from speaking to many people who recently lost their home as well as a family member in northern CA who is an Insurance Adjuster.
It is difficult to know who to trust when things happen so suddenly and dramatically, especially when you most likely have lost your records and are displaced.
Did you know that your insurance adjuster has taken an oath to do no harm?
Who are Insurance Adjusters? 1) Public 2) Independent 3) Company, sometimes called Staff adjusters. Public adjusters represent the insured, while independent and staff adjusters represent the insurer.
Your Insurance Policy
Your policy is unique to your property, the cause of the damage and level of damage done. Your Policy has a few key components including: your Policy Limit, schedule of Coverages, Declarations and Endorsements. Outlined below is us trying to understand the basic elements of insurance as it relates to rebuilding single family residences classified as a total loss. I will not go into detail in this document about injury, personal belongings loss, commercials loss, or partial losses.
Your type of Insurance is based on Occupancy
There is a difference between if you are using the property as your own home (Homeowner's Property Insurance) versus if you are renting (Rental Property Insurance). There are coverages offered for Homeowners that are not included for Rental property.
Q. What happens if you have a Homeowner’s Policy but at the time of the claim you were renting the property?
Limits of Liability (Policy Limit)
Central to it all is your Policy Limit, that dollar amount most important to you. This amount represents the total amount of money your insurance company will potentially pay out in the event of a claim. This amount would have been established at the time you created your policy. The amount is based on your Property Description as understood by your insurance company and described in your policy.
Property Coverage
Your property coverage is broken down into several categories. This example is for a Homeowner's Policy. A Renter’s Policy will be slightly different. Each category has limits and each category covers different aspects of your overall property. Check with your insurer specifically.
Category A- Primary Dwelling and attached structures such as garages and decks.
Category B- Other Structures such as detached garage and sheds.
(Typically 10% dollar mount of Category A) ADUS?
Category C- Personal property such as furniture and clothing.
(Typically 50% dollar amount of Category A)
Category D- Loss of use or access to your dwelling.
(Typically 20% dollar amount of Category A)
In the case of a Rental Property Policy
Category A and B can be the same as above
Category C- Personal Property (aka the landlords personal property in the rental) is often set very low. The landlord can require the renter to carry their own Renter’s Insurance and if the landlord has personal property within the unit, then speak to your Insurer. If a renter loses property they will be much less upset if they have their own Renter’s Insurance. Many Rental Agreements may require the renter to carry their own Renter’s Insurance.
Category D will cover loss of rent.
Adjusting against your Policy Limit
As set forth in California Insurance Code Section 2051, “Under a policy, subject to California Insurance Code Section 2071, where the insurer is required to pay the expense of repairing, rebuilding or replacing the property destroyed or damaged with other of like kind and quality, the measure of recovery is determined by the actual cash value of the damaged or destroyed property”
https://codes.findlaw.com/ca/insurance-code/ins-sect-2051-5/
The Insurer's Adjuster will review the loss and make a statement on whether the cause of the loss is covered under your policy. Many policies do not cover losses as the result of earthquakes or floods. Fires, especially these recent wildfires, as yet, are most likely included. The insurer's adjuster will also determine if the loss is total or partial, establishing what or what percentage does or does not need replacement or repair. This determination is a lot easier with the recent total losses from the fires. A silver lining is that this can quicken the adjustment process.
In the event of a Total Loss, the loss will be equal to the Amount of Insurance shown on the Declarations Page for Coverage A-Dwelling
Q. What about Coverage B?
In the event of a Partial Loss, the insurer will pay for the loss or damage of the dwelling up to the lowest of:
The actual cash value of the lost or damaged component parts of your dwelling at the time of the loss;
The amount required to repair or replace the lost or damaged component parts of the dwelling;
The amount of Insurance shown on the Declarations Page for Coverage A-Dwelling
From here they will itemize the dollar amount of the loss against the scheduled coverages. How they do this will vary with your policy details. Typically this will involve figuring out the replacement cost of the item lost minus an amount for the depreciation of that item. Old items will depreciate more; newer items will be depreciated less. They wont depreciate to zero, don’t worry…but some deduction will be made. Itemization and adjustments will be based upon definitions outlined within your policy, sometimes guided (and changed at times) by CA state law.
Terms such as “Actual cash value” have specific definitions as do all of the other Endorsements in the Disclosure section. See the list and please add to it below.(need clarity and expansion)
These definitions as well as the records of what was lost will impact how your policy is adjusted. This last part is why you should gather as many records of your property that you can. Plans, photos, receipts for any updating you may have done and when you made them. These items will be sorted into the Coverage Categories, for instance, should that item list in Coverage A, B, or C. This is important because each category has its own limits.
Property Insurance in more depth:
If you go to your full Policy Documents with Declarations (aka the Dec Pages) you will see a section called Special Limits and Additional Coverages. Read this section carefully. It will show limits on specific items that may catch you unawares. On the flip side you may see additional coverages that benefit you. For instance it may have a line item for Debris Removal or Tree Replacement.
Endorsements within the Disclosure Pages
This is important information on your coverage which may not be in the first pages of your coverage and your insurance agent may not have gone over them extensively when you got the policy. Yet just like the Special Limits and Additional Coverages, these pages contain critical information regarding your Property Coverage.
Info about your property. This lists basic data on your home. If this is incorrect then….
Buried behind pages and pages of information and blank pages in our insurance is a sheet that contains critical information that may be in your policy:
THE LIST: of all the endorsements out there and let's have an open discussion.
If you are a naturalist and you want to save a community, the first step is to name all the species present.
The Policy Limits cover the structure and when it is a total loss, this is fairly easy to calculate, but after that the insurance payout is contingent on you rebuilding. This does mean that if you do not rebuild then the insurance company stands to save some money over the long run. There is incentive not to questions too much the initial payout of the Policy Limit for the total loss, but for the insurance company to do more questioning on the payouts in the Disclosure pages related to the rebuild.
Debris Removal Coverage: additional % of damaged covered property limit.
Typically 5%. The policyholder is responsible for the debris cleanup. (need definition and expansion)You can do this privately by opting-out. If so you will also be responsible for certifying that the site is free of hazardous materials, which can be a very costly proposition. Or by Opting-in with the US Army corps. When you opt-in this $ portion of your payout will go to the Army Corps.
Insurance will not cover components damaged by the Army Corps in its debris removal such as driveways and other property elements.
Building Code Upgrade Coverage: also called Ordinance and Law coverage, covers additional costs to repair or replace a dwelling to comply with the building codes and zoning laws in effect at the time of loss or rebuilding. These costs may otherwise be excluded by your policy. Meeting current building code requirements can add significant costs to rebuilding your home.
We have seen typical coverages of 10%-20%. With one policy being 50%!
However your policy only covers code upgrades for the covered building within your policy. A different design or even the extra 10% in the 110% can complicate the insurance payout. In conversations with public adjusters and the CA insurance commission their suggestion was to have the structure and property that was insured cost evaluated as it was built as if rebuild under the current code cycle using the program Exactimate.
Actual Cash Value Coverage: for either a total or partial loss to the structure or its contents pays the amount it would cost you to repair, rebuild, or replace the thing lost or injured, less a fair and reasonable deduction for physical depreciation based upon its condition at the time of the injury or policy limit, whichever is less.
Replacement Cost Coverage: is intended to provide for the cost to repair or replace the damaged or destroyed dwelling, without a deduction for physical depreciation.Many policies pay only the dwelling’s actual cash value until the insured has actually begun or completed repairs or reconstruction on the dwelling. Coverage only pays for replacement costs up to the limits specified in your policy.
Extended Replacement Cost Coverage: provides additional coverage above the dwelling limits up to a stated percentage or specific dollar amount.
Guaranteed Replacement Cost Coverage: covers the full cost to repair or replace the damaged or destroyed dwelling for a covered peril regardless of the dwellings limits shown on the declarations page.
Rebuild or take the money and move on?
From the CA Insurance Code section 2058, “If a loss arising out of fire is rebuilt or replaced, an insured covered by a valued policy shall receive full payment for the loss up to the face amount of the policy. If the loss is not rebuilt or replaced, an insured covered by a valued policy shall receive either the replacement value of the loss or the face amount of the policy, whichever is less”.
Generally speaking this means that your insurer will offer you the Actual Cash Value of the house after the loss. Nearly always this is after depreciation and deductions and less than your Limit Amount. You can take that check and you have many options with how to use that money, but if you use that money to rebuild then the insurance company is obligated to provide additional assistance up to your Limit Amount. (Plus any beneficial endorsements you may have)
As used in this section, “valued policy” has the meaning set forth in Section 412