Fire Insurance Claim Pointers

in Insurance Law by Stephen Raucher

In light of the terrible fires plaguing California, policyholders should keep in mind some basic principles should they find themselves needing to make a claim, or even if they just want to re-evaluate their property insurance policies. Many of these pointers are unique to California law.

• Fire losses must be reported “without unnecessary delay.”
• Policyholders must provide a sworn proof of loss within 60 days of the loss.
• Policyholders must cooperate with the insurer in its investigation of the claim.
• Such cooperation typically includes an obligation to submit to an examination under oath, which can even be a condition to payment.
• The policyholder has a right to be represented by counsel in connection with such an examination, though at his or her own cost.
• The standard fire insurance policy requires that any lawsuit against the insurer be filed within 12 months of the loss, although that can be extended to 24 months if the loss is related to a declared state of emergency.
• Property insurance policies may call for appraisal in the event of a dispute over loss value. Appraisal is similar to arbitration, but less formal. Appraisal cannot be compelled if the loss is related to a declared state of emergency.
• Depending on the policy language, loss is generally based either on “actual cash value” or “replacement value.”
• Actual cash value is measured by the fair market value of the damaged structure as of the date of loss.
• As its name suggests, replacement cost is the reasonable amount necessary to repair and replace with similar construction. Replacement cost coverage is better (and more expensive) for the policyholder.
• Insurers must comply with the Fair Claims Settlement Practices Regulations, which generally require that a claim be accepted or denied within 40 days. Failure to satisfy the regulations can give rise to a bad faith claim by the policyholder.

When the spotlight is on them during times of well-publicized disasters, most carriers responsibly adjust their policyholders’ claims. However, there are always exceptions, and policyholders should not hesitate to seek legal assistance at any stage of the process in order to protect their rights.