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Sam Sorich, president of the Association of California Insurance Companies (ACIC), released a statement in response to Insurance Commissioner John Garamendi’s recent comments regarding the response of the insurance industry to the October 2003 Southern California Wildfires:
“We deeply sympathize with the victims of last year’s devastating firestorms in Southern California. Insurance companies immediately responded to the plight of their customers by establishing assistance centers in burned-out areas even as the fires still raged. Insurers ever since have been working closely with their customers in the recovery process.
“It is important that homeowners know the provisions of their policies before these kinds of disasters strike. The Legislature and governor recognized this fact several years ago when they required insurers to regularly provide their policyholders with details about their homeowner policies.
“All of this raises a number of questions about the Department of Insurance’s role in the education process. In other words, helping California consumers before disaster strikes and not just complaining about insurance companies after the fact.
“We are especially disappointed the commissioner recently said that insurers are screwing their policyholders big time. Insurers, in fact, are doing the best they can to help their customers through this difficult time. After all, insurers are in business to provide a service and to keep their customers as satisfied as possible. It makes no sense for an insurer to screw its policyholders and expect to stay in business,” Sorich continued.
“We’ve heard a great deal since last year’s fires from the Department of Insurance. But what did we hear from the department before the fires?
“The Department of Insurance’s budget is more than $130 million. It seems to us that the department could have found some funding within that huge budget to better educate consumers so coverage issues that are now being discussed could have been avoided.”
The following statement was issued by the Department of Insurance:
Flanked by survivors of last year’s Southern California firestorm, Insurance Commissioner John Garamendi urged the Legislature May 3 to act immediately to protect homeowners from the serious insurance problems that have surfaced in the wake of the disaster.
The commissioner’s “Homeowners Bills of Rights” (HOBOR), provides key legislation that will help current survivors rebuild their lives more quickly, and to ensure that future disasters don’t cause the same types of problems.
“It is clear that the survivors of the firestorm have experienced serious hardships because of the way that insurers have handled the aftermath of this disaster,” Garamendi said. “My legislation will hold insurers accountable for their actions, and ensure that they fulfill their promises to their policyholders.”
Commissioner Garamendi recently held several town hall hearings in the San Diego area to hear the concerns of residents. Nearly 1,000 residents attended, many with numerous complaints about the way their claims are being handled by insurance companies. Earlier the Commissioner held similar hearings in the San Bernardino area.
The issues of concern for homeowners ranged from underinsurance—when the insurance policy does not fully cover the cost to rebuild—to the assignment of multiple adjusters to handle an individual claim. “These people were victimized by the fires when their homes were destroyed. I want to make sure that they aren’t victimized again by the insurance process,” Garamendi said.
The commissioner recently created a “Firestorm Strike Force” to investigate the complaints and help bring closure to the survivors, many of whom are living in temporary housing as they wait to rebuild. So far, efforts by the Department of Insurance have helped secure $3.1 million for survivors who were unable to successfully resolve claims with their insurers. The commissioner’s HOBOR legislative package includes:
* Senate Bill 1855 (Alpert) (As proposed to be amended) – Requires insurance companies to disclose to homeowners the additional cost of coverage that is more extensive than the homeowner’s current coverage. It also requires insurers to include additional information about the insured property on the declaration page, such as the square footage of the insured structure, as well as a disclosure statement regarding the valuation of the structure (the dollar amount per square foot to rebuild). The disclosure will also inform the consumer to seek additional information if he or she does not believe the limit of liability is sufficient to rebuild the structure.
* Assembly Bill 2199 (Kehoe) – This bill establishes a minimum period for homeowners to repair, rebuild, or replace their home after a loss. It allows a 12-month period in non-catastrophic situations (with additional 6-month extensions if the policyholder can show good cause), and a 24-month period for declared “state of emergency” situations. The time commences with the payment of actual cash value. In the event of a total loss, allows homeowners the flexibility to rebuild or replace in a different location than where the original loss occurred.
* Senate Bill 1474 (Escutia) – Requires an insurance company to issue and renew a homeowner’s policy unless there were three or more claims within three years. In addition, no surcharge on a homeowner’s premium can be levied unless there are three or more claims within three years. This bill will protect consumers by prohibiting “use it and lose it” practices by insurance companies, while at the same time providing insurers with the opportunity to re-evaluate policies for consumers filing multiple claims.
* Assembly Bill 2962 (Pavley) – Establishes a uniform measurement of “actual cash value” and prohibits the depreciation of labor costs from homeowner claims to provide consistency for how claims will be adjusted, as well as prohibit insurance companies from deducting the cost of labor in settlements. AB 2962 also ensures that insurers do not depreciate items that, by their nature, do not depreciate during the normal life of a structure. Such items might include two-by-four studs, drywall, cement posts, and similar components.
* Fire Victim Claims Mediation (Bill # to be determined): This proposed legislation would give the California Department of Insurance authority to sponsor a mediation program to expedite the resolution of conflicts between victims of the Southern California wildfires and their insurance carriers. It would cover issues relating to coverage, scope of loss, and claims settlement and payment practices. Mediators would be selected from a list of qualified applicants established by the Department but paid for by the insurer involved in the dispute. The program is voluntary, either party may accept or reject any agreement proposed during the mediation, and consumers would have up to three days to rescind any agreement reached during mediation.