Insurance companies use illegal policy provisions to burn homeowners in wildfire claims: report – InsuranceNewsNet

Consumer watchdog demands immediate action from Commissioner as CDI’s internal audit of FAIR plan confirms illegality

LOS ANGELES , July 11, 2022 /PRNewswire/ — A Consumer Watchdog review of public documents reveals that insurance companies have inserted provisions in the fine print of their home, condo and renters insurance policies that allow them to limit or deny coverage after a forest fire in violation of California right. Read the report, “Up in Smoke: How Insurance Companies and the Insurance Commissioner Burn Wildfire Victims,” here: https://consumerwatchdog.org/sites/default/files/2022-07/UP%20IN%20SMOKE%20report.pdf

Among the provisions are:

  • “Smoke Damage” Recovery Limits – Smoke is often the most common and costly result of wildfires. Insurance companies have adopted policy provisions that treat “smoke damage” as distinct from “fire damage” and limit compensation for smoke damage to an amount well below coverage. full policy in case of fire.
  • Arbitrary Loss Reporting Triggers – State law only requires policyholders to report a loss in a timely manner. Instead of setting the reporting deadline based on the date of the loss, some insurance companies arbitrarily base the reporting trigger on some other event, such as “wildfire start date”, which could lead the company to refuse such a late claim.
  • Recovery sub-limits – California the law requires that fire insurance policies cover “any loss by fire”. But some companies limit compensation if a homeowner misses a reporting deadline or based on the type of loss caused by a fire (like, for example, the smoke damage sublimits listed above).
  • Beginning of Coverage Exclusions – These provisions indicate that a policyholder has no coverage for losses caused by a wildfire that occur within a certain period of time after purchasing the policy (usually 72 hours).
  • Valuation Prohibiting Lawsuit Provisions – These provisions prevent a policyholder from suing an insurance company in court for a claim dispute either (1) without first going through a loss valuation process; or (2) after going through the assessment.

All of these provisions are illegal under California right. Consumer Watchdog also found that many insurers unlawfully fail to inform policyholders of their legal rights after a government-declared wildfire disaster.

Companies whose policies contain these illegal provisions include Farmers, Travelers, Nationwide, and the California FAIR Plan. The FAIR Plan is a government-mandated but industry-controlled organization that sells policies to Californians who cannot find coverage in the marketplace — a population that has grown rapidly as private companies have refused to sell. insurance in communities around the world. California.

Indeed, an as yet unannounced internal audit of the FAIR Plan, conducted by California Department of Insurance investigators, confirms that the FAIR plan policies contain provisions limiting compensation for “smoke damage” – and that they violate California right.

Consumer Advocates See Illegal Complaint Practices

California Regulators, who are required to review homeowners insurance policies to comply with state law, should never have allowed those policies to be sold, Consumer Watchdog said. Policy provisions that allow companies to deny or restrict coverage directly affect rates and premiums. Thus, under Insurance Reform Proposition 103, insurance companies must submit such policies to the Commissioner, justify the rates they propose to charge for such policies, and obtain the Commissioner’s approval.

“The financial harm and personal trauma homeowners experience when their insurance company refuses to pay legitimate claims is incalculable,” said Harvey Rosenfield, author of Proposition 103 and founder of Consumer Watchdog. “Insurance companies cut payments or denied coverage altogether when people filed claims after the horrific wildfires that swept the state in recent years. The frustration and heartbreak of battling with a company about the insurance coverage you have already paid for can be as serious as the disaster itself.Insurance Commissioner Lara must take immediate action to rectify this gross injustice and uphold the law.

Insurance Commissioner Lara has scheduled a public hearing on the FAIR plan on Wednesday, July 13, 2022at 9 am in Oakland.

Request for immediate action from Commissioner Lara

Consumer Watchdog called on Commissioner Lara to: (1) stop approving policies which are illegal; (2) use the full authority of his office to cause insurance companies to reopen and pay claims which have been reduced or denied for unlawful reasons (as Insurance Commissioner John Garamendi did after 1991 Oakland Hills fires); (3) impose maximum financial penalties on insurance companies that violate the law; and (4) investigate and seek criminal prosecution of corporations and corporate officers who have defrauded policyholders, including conspiracy to reduce coverages in violation of state antitrust laws. The organization also called for an independent audit of the agency’s failure to recognize and stop illegal conduct.

Since taking office in January 2019, Insurance Commissioner Lara has made a point of visiting communities devastated by wildfires and has repeatedly pledged to protect Californians from wildfire insurance abuse. Regulations have been proposed, but not yet passed, that would require insurance companies to give homeowners a discount on their premiums to reduce the risk to their home and property, and Consumer Watchdog urged the commissioner to fill a dangerous escape in their language.

Read the Consumer Watchdog report here: https://consumerwatchdog.org/sites/default/files/2022-07/UP%20IN%20SMOKE%20report.pdf

Read the audit of the CDI FAIR plan here: https://consumerwatchdog.org/sites/default/files/2022-07/CA%20FAIR%20PLAN%20ASSOCIATION%20-%2003-18-21%20-%20Report.pdf

Read Consumer Watchdog’s comments on Commissioner Lara’s latest proposed landlord regulation here: https://consumerwatchdog.org/sites/default/files/2022-07/2022-07-01%20CWD%20Comments%20REG-2020-00015.pdf

Consumer Watchdog is a nonpartisan, nonprofit organization that has monitored the insurance industry and the Insurance Commissioner’s compliance with California law since the voters passed Insurance Reform Proposition 103 in 1988. The organization advocates and enforces Proposition 103 in court and at the California Department of Insurance. Organization challenges over excessive auto, home and business insurance rates saved Californians $3.48 billion since 2004

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SOURCE Consumer Watchdog

Kristan F. Talley