Updates for North Bay Fire Victims

We have been talking with many North Bay fire victims and a number of common issues have arisen. Here are some of the answers to those questions:

1. If I build somewhere else, what is the insurance company required to give me?

Answer: In most cases, the insurance company will calculate what the cost would have been to repair your home in the event you decided to replace your home at the site of the loss. Remember that the insurance company will not pay more than the policy limits and will require that you actually pay to replace your home where it was totally destroyed, or to build or purchase a property elsewhere. Under replacement cost coverage, you must actually spend money to replace your home.

2. The insurance company wants to give me less than my policy limits for actual cash value. Can they do this?

Answer: In California, in general, in the event of a total loss to a structure, the insurance company must pay the policy limit or the fair market value of the structure, whichever is less. The fair market value is determined as of the time before the premises were lost to fire. This may require an appraisal to determine fair market value. If the fair market value exceeds the policy limit, then the insurance company is required to pay you the policy limit. In that event, there is no requirement that you actually replace your home. However, if the policy limit is greater than the fair market value, then the insurance company is only required to pay fair market value; it is not required to pay anything further until and unless you replace your home.

3. My policy limits seem inadequate to fully cover my loss. Is there anything I can do about this?

Answer: In general, your insurance company is not required to set adequate policy limits. It is up to the insured to determine sufficient coverage for his or her needs. See California Insurance Code Sections 10101, 10102. Therefore, unless you have “guaranteed replacement cost coverage” — which few policies have, you will be limited to policy limits shown on the declarations page.

4. Is it possible that I have limits in excess of what is shown on the declarations page?

Answer: Yes. The North Bay fire zone has been declared a disaster area. In many policies, this triggers additional limits, which can be anywhere from 30% to 80% higher than what is shown as limits on your Declarations page. The policy will show these additional limits (if any); if you have further questions, contact your insurer for clarification.

5. What if I am still underinsured, even after increases in my policy? Is there anything else I can do?

Answer: Yes, there may be:

The Federal Emergency Management Administration (FEMA) does provide relief for a person who is underinsured and suffers in a federally/declared disaster. However, FEMA will require precise evidence of insurance payouts before doing so. FEMA has told us that it is designed to cover gaps in coverage, but that everything is determined on a case-by-case basis. You should immediately make a claim to FEMA so that your case will be considered. The application process is either online, by phone (1-800-621-3362) or in person.

In order to find out if you are qualified for assistance, you can to go to the FEMA website: https://www.disasterassistance.gov/ and fill out all the requested information. Or you may do this in person at special local assistance centers: http://wildfirerecovery.org/local-assistance/local-assistance-centers/

6. Must I continue to pay my mortgage even in the event of a total loss?