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Tuesday, Dec 6, 2022

Many Get Burned Twice: By Fire, Then Insurer

Karen Riemus was glad she was an attorney when she began dealing with her insurance company after her house was destroyed during the October 2003 wildfires.

Still, Riemus’ experience as a litigator wasn’t enough to win her family enough money to pay for construction of a new home.

The Scripps Ranch resident turned to San Diego-based construction management firm Gafcon, which has been involved in many cases of reconstruction following catastrophic events. For local victims of last year’s wildfires, the company charged a flat fee of $1,500 almost half the market rate to prepare an independent scope of loss report, which detailed the damage and analyzed the insurer’s financial responsibility, based on each customer’s homeowners insurance policy.

Robert America, a senior estimating consultant for Gafcon, said the firm has produced reports for 18 Scripps Ranch homeowners and one Crest resident.

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America said Gafcon’s clients felt like they were victimized twice by the wildfires and then by their insurance companies that told them they were underinsured. That made those customers wary of Gafcon at first.

“It took several meetings for us to meet with them and break down those barriers,” America said.

Riemus felt her insurance company did not give her enough money to rebuild her home, but did not know how to prove the insurer owed her family more money.

“Gafcon played a huge role leading to what I feel is a fair and equitable settlement,” she said.

Riemus is one of the homeowners who lobbied the California Legislature this year to pass laws that make up the Homeowners Bill of Rights.

Assemblywoman Christine Kehoe, D-San Diego, wrote Assembly Bill 2199, which allows homeowners more time to reach insurance settlements and rebuild their homes.

Carrie Beckstein, a spokeswoman for the California Department of Insurance, said the department received hundreds of complaints from homeowners who felt they were getting nowhere with their insurance companies.

Underinsurance was the top complaint. Beckstein said many people had not increased their insurance coverage each year, so they did not receive a large enough settlement to pay all their construction costs.

Most of the 610 complaints received by the Department of Insurance have been settled, Beckstein said, with the department recovering almost $7.4 million on behalf of Southern California fire victims.

The October 2003 wildfires leveled 2,668 homes in San Diego County and caused more than $1 billion in damage.

Bob Ilko, a local construction attorney at Barker Law Group and a member of the Scripps Ranch Civic Association, did not lose his house in the wildfires, but he is helping neighbors understand their insurance policies.

“People who were on hold are moving forward,” Ilko said. “It’s like fighting a dragon with many heads and arms. It varies from adjuster to adjuster and insurance company to insurance company.”

He said insurers are “reforming” some insurance policies to get fire victims more money to pay for construction. That means companies are writing new policies to increase settlements and homeowners are paying an extra premium to pay for the coverage.

No Coverage

Ilko said non-renewal of insurance policies will be a problem for every San Diego County homeowner because of the cost to rebuild. He said some insurance companies have decided not to renew insurance policies, even for Scripps Ranch homeowners who did not lose their homes and who have never filed a claim.

Rich Halberg, a California spokesman for Allstate, said the Northbrook, Ill.-based insurance company is still writing homeowners insurance policies in Southern California and accepting new business.

According to Halberg, policies were renewed for more than 99 percent of Allstate’s Southern California customers who filed claims resulting from last year’s wildfires.

Pete Moraga, a spokesman for the Insurance Information Network of California in Los Angeles, said there were 19,100 insurance claims in Southern California relating to the wildfires, adding up to a $2.04 billion loss , half the amount of all homeowners insurance premiums paid in California in 2002.

As of April, IINC found that 84 percent of the wildfire claims had been settled.

The organization is a nonprofit, non-lobbying insurance trade association that informs consumers about insurance and safety issues.

Moraga said each unsettled insurance claim is affected by a different set of factors.

Contractors are estimating rebuilding prices at $100 to $250 per square foot, depending on the home, how much other work the builder is juggling, and the rising cost and lowered availability of construction materials, he said.

“Also, a lot of homeowners don’t buy enough coverage,” Moraga noted.

In a recent IINC survey, 71 percent of the respondents said it was their responsibility to update their policies, rather than their insurance agent’s or company’s. However, only 56 percent said they updated their insurance policies during the past year.

“As an industry, we’ve learned we have to do more to educate homeowners,” Moraga said.

Bloomington, Ill.-based State Farm Insurance had about 4,000 claims in San Diego County, according to spokesman Scott Smith. About 90 percent of the claims have been settled, he said.

Smith did not indicate that State Farm has changed how it underwrites homeowners insurance policies. However, he said agents look at a number of factors, such as the type of roof, distance of a fire hydrant from the house, and the distance of brush from the house.

Still Writing Policies

“I don’t believe there are any areas where policies are not written anymore,” Smith said. “We have to look at the risk. There might be homes where we’ve written (policies) before the fires that we wouldn’t cover now.”

Before the wildfires, State Farm had a moratorium in place that kept agents from writing new homeowners insurance policies in California in order to reduce the company’s market share. However, agents are now able to take on new customers to replace policies that are not renewed, Smith said.

According to the California Department of Insurance, State Farm has a 22 percent share of the homeowners insurance market, the largest share of any insurer in the state.

Novato-based insurer Fireman’s Fund has a 1.8 percent share of California’s homeowners insurance market, giving it the 10th largest market share. The company is still writing new policies here, according to John Kozero, a spokesman for Fireman’s Fund.

“We have not changed our appetite in California or any part (of the state),” Kozero said.

Fireman’s Fund had 98 claims in San Diego County related to last year’s wildfires, and 91 of those have been settled, he said.


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