California Wants Insurers to Reimburse Costs for Those Displaced by Wildfires

September 3, 2020

California Insurance Commissioner Ricardo Lara issued a notice to all California property/casualty insurance companies urging them to cover additional living expenses for policyholders who remain under mandatory evacuation or whose homes are otherwise inaccessible or uninhabitable due to the wildfires.

“When people are told to get out of harm’s way by first responders, they should be able to access insurance benefits, not be forced to pay out of pocket for necessary emergency costs when they are still under evacuation orders or without water or power,” Lara said in a statement.

All homeowners’ insurance policies provide benefits for loss of use or ALE to cover the extra costs associated with temporary lodging, transportation, clothing, and other necessities caused by a covered peril, such as a wildfire, that renders the home uninhabitable or inaccessible. Homeowners’ insurance policies also cover ALE if access to the home is restricted in cases where a civil authority has issued mandatory evacuation orders from the recent and ongoing wildfires impacting most of the state.

The California Department of Insurance reports having received numerous complaints from policyholders being told by insurers their ALE benefits are being terminated after the initial two weeks unless the insurance company can verify, or the policyholder can prove, that the policyholder’s property suffered damage due to the fires and is still currently uninhabitable. The CDI also reports receiving several related consumer complaints of ALE benefits being discontinued when their homes are uninhabitable due to lost power or water service as a result of the wildfires.

Lara sponsored Senate Bill 872, authored by state Sen. Bill Dodd, this legislative year to address these and other insurance claims issues following a wildfire emergency. The bill passed through Legislature and is now heading to the governor for his consideration.

SB 872 would allow for an extension of the two-week limit that is currently in place, and allow for coverage when a home is not damaged but is otherwise uninhabitable for another reason, such as having no electricity or water service caused by a covered peril. The bill would also require an advance payment of no less than four months for costs for living expenses and mandate an advance payment of no less than 25% of a policy limit for lost contents without submission of an inventory form, among other consumer protections.

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