Preserving Your Insurance Rights and Maximizing Recoveries After a Disaster

The horrific wildfires unleashing carnage in Southern California underscore the need for reliable insurance protection.  Virtually every commercial property and homeowners insurance policy covers the peril of fire (whether under an all risk or named perils insurance product).  Thus, every policyholder should be receiving prompt insurance coverage for damage and destruction of their property—whether the policyholder is an individual or an organization.  As has been advised by our firm previously, time element insurance coverage, such as business interruption coverage, is routinely available for organizations that are impaired or shuttered by a covered peril.  Other insurance protections often sold to businesses and other entities include civil authority coverage, ingress/egress coverage, and contingent business interruption coverage.

In the homeowners insurance context, many insurance policies will provide coverage for additional living expenses or loss of use up to a certain amount of policy limits (or period of duration) where a home is rendered uninhabitable by a covered loss.  Obviously, this is a crucial lifeline for many homeowners who are displaced by a disaster such as the one unfolding in California.  Such coverage should provide payments to cover the cost of alternative living space, meals, and other necessities until the policyholder is able to return to their repaired, reconstructed or remediated premises.

The Fine Print

A.       Notice of Loss
Property insurance policies generally require prompt notice of loss.  Late notice can result in forfeiture of coverage in the worst case, and to needless coverage fights in less extreme cases. Policyholders should give notice promptly to all possibly relevant insurance companies.

B.       Proofs of Loss
Filing a proof of loss is an essential aspect of the insurance recovery process and failure to file the proof of loss within the timeframe specified in the policy may result in the insurance company denying a policyholder’s claim.  Typically, property policies provide that policyholders must file a sworn proof of loss within 30, 60 or 90 days from the date of loss or from the insurance company’s request for a proof of loss.  Policyholders should review their policy to confirm the deadline to file.  Once confirmed, policyholders should mark that date in their calendar and strictly abide by that deadline.  If the policyholder is unaware of the total loss suffered, they can file a partial sworn proof of loss, but be sure to reserve the right to supplement the proof of loss.

C.       Cooperation
Property insurance policies typically require the policyholder to cooperate with the insurance company during their investigation of the loss.  Policyholders should respond promptly to all reasonable requests for information from the insurance company as best they can.  If possible, respond in writing and preserve all communications.  If any communications are by phone, policyholders should keep detailed notes of these conversations including the date, time and name of the insurance company representative with whom they were speaking.  Further, if any agreements are made by phone, write a letter confirming the verbal agreement and send it to the insurance company.

D.       Suit Limitation
Many property insurance policies contain a contractual suit limitation provision, which provides that any insurance coverage lawsuit must be filed within a short period of time – usually one or two years – after the inception of the loss.  Cal. Ins. Code Ann. § 2071, which applies to all standard form fire insurance policies sold in California, provides for a one-year suit limitations period:  “No suit or action on this policy for recovery of any claim shall be sustainable unless commenced within 12 months after the ‘inception of the loss.’”  Cal. Ins. Code Ann. § 2071 (West).  Your policy may provide for a longer period of time in which to bring suit.

Policyholders should read their policies carefully and calendar all important dates contained within the policy and strictly abide by each.  If the policyholder requests an extension of any policy deadlines, they should do so in writing well in advance of the deadline and preserve all correspondence with the insurance company.  Although insurance company conduct may give the policyholder a waiver or estoppel argument with regard to statutory or contractual suit limitations, don’t bet on it.  Instead, make sure to file your suit within the applicable time period.  Policyholders may also consider entering into a written tolling agreement with the insurance company to extend the date by which they must file their suit.

Not all fine print in the insurance policy works against the policyholder.  Some fine print requires insurance companies to make partial payments or policy advances—even where the amount of loss is not fully calculated.  Whether such a clause exists or not in the insurance policy, policyholders should still always ask for interim payments to help fund recovery efforts and to provide a cushion while the property is being assessed for damage or is under active repair or reconstruction.

Preserving Your Insurance Rights

If your insurance documentation was lost in the disaster, seek out your insurance policy information from your insurance broker or the insurance company agent.  If they do not have it, request it directly from your insurance company.  If an insurance company refuses to furnish you with a copy of your insurance policy, persist in obtaining it and involve your state insurance commissioner if necessary.

Document, as best as possible, the back and forth that is often central to the claims process.  This means following up in writing regarding any meaningful discussion or meeting with your insurance company and their agents and adjustors.  Document everything that is and is not occurring in connection with the claims adjustment process, including all insurance company delays.

Most states require property insurance companies to offer their policyholders an insurance policy with terms that provide equal or greater protection than what is set forth in the state’s fire insurance code.  Indeed, most policyholders will have recourse where an insurance company seeks to provide a more limited scope of protection than what is afforded under the fire insurance code provisions.

Remember that insurance companies have a duty of good faith and fair dealing when handling claims.  Good faith claims handling means, among other things, that insurance companies are duty bound to refrain from low-balling their policyholders on damage calculations and delaying payments.