As fires began to rage uncontrolled throughout Southern California on the night of Oct. 21, Natalie Lake, a claims adjuster with Farmers Insurance Group’s catastrophe response team, received a call.
The Bay Area resident was informed that she was being “deployed” to the Santa Clarita Valley, where three separate fires would eventually burn nearly 40,000 acres, destroying 15 homes and damaging many more.
“They told me Sunday evening to pack my bags and be here Monday morning,” said Lake last week from a hotel room in the northern Los Angeles suburb where she is temporarily living.
Claims related to the fires had begun to pour into the Los Angeles-based insurance company on Sunday night, not long after the fires began, keeping Lake and other adjusters busy.
As of Oct. 25, Farmers, the state’s second largest homeowners insurer, reported receiving 2,700 claims. The state’s biggest home insurer, State Farm General, said it had received 2,280, including 447 for destroyed homes.
Estimates put the damage caused by the wildfires in Los Angeles, San Diego and other Southern California fire at $1 billion or more. And while that would not top the $1.7 billion in insured losses stemming from the 1991 Oakland Hills fire, even without adjusting for inflation, handling them is a huge undertaking for the insurers.
Fire coverage is a standard component of home owners’ insurance policy, which suggests that a substantial portion of the losses resulting from the fires will be covered by insurers.
‘Hand-holding’
Since arriving in Santa Clarita, Lake and other members of her team have spent 14-hour days processing both substantial and more minor claims related to the fires.
“When you see what customers have lost you just want to do what you can to help them out. We spend a lot of time hand-holding with the customer,” said Lake, who noted some of her intake sessions can last as long as four hours. “You do as much as you can to get the job done and sometimes that means you don’t get as much sleep.”
The magnitude of the losses has some insurance industry observers wondering whether Farmers, State Farm and others might raise insurance rates or even pull out of the market as Allstate Corp. did in May when it announced it would no longer write new homeowners policies in California.
Farmers and State Farm have denied any such plans, and, in any case, right now they are focused on the huge task of promptly handling claims.
That job was made a bit easier by a decision by state Insurance Commissioner Steve Poizner to allow the companies to use adjusters from out of state who do not have California-issued licenses to perform that work.
Bill Sirola, a spokesman for State Farm, said the company had five teams of adjusters canvassing impacted areas, and those teams include more than 60 “out-of-state claims folks.”
Sirola said State Farm has 1.4 million homeowners’ policies in California, representing about one of every five such policies in the state. “We expect one out of every five claims filed to be a State Farm customer,” he said.
Allstate, California’s third largest home insurer with a total of 900,000 policies, has sent out more than half a dozen mobile units to assist customers in processing claims.
“We are continually accessing the most updated information to send our response team out to augment adjusters already in southern California. We have been getting claims adjusters on site at evacuation centers,” said Allstate spokesman Peter DeMarco.
This past week, the insurance companies’ most pressing business has been providing customers unable to return to their homes with housing allowances.
There is no industrywide standard for what conditions have to be met for policy holders to avail themselves of housing allowances. Sirola said State Farm provides “additional living expense” to help policy holders find a place if their house has been destroyed and they have nowhere to go.
Experts predicted many policy holders impacted by the fires are likely to be disappointed by the limits of their coverage.
“What I worry about as an insurance litigator is whether the policies adequately protect home and business owners,” said Jeffrey Masters, a Los Angeles-based litigation partner at Cox Castle & Nicholson LLP, who routinely represents policy holders suing their insurance companies.
“Many owners do not regularly update their coverage amount and with the increase in construction and labor costs over the past three to five years, there may be a significant difference between what insurance companies will pay and what it will cost to rebuild.”
Additionally, owners of older homes and structures may not be protected from the increased rebuilding cost associated with current building codes that are more stringent. While insurance companies offer protections “attributable to the cost of changes in the building codes,” it is an option that many homeowners go without, Masters said.
