PD Editorial: Filling the gaps in fire insurance policies

In the aftermath of 2017’s record-setting wildfires, amid warnings that fires are now a year-round threat, California’s insurance commissioner warned that Golden State residents are finding it harder to obtain - and keep - homeowners coverage.

And many of those who had coverage, faithfully paying their annual premiums, are discovering obstacles as they try to recoup their losses.

To collect the full value of coverage for property losses, policyholders must provide a detailed inventory including the age, price and value of everything from bath towels to family heirlooms. It turns out that policies promising 125 percent of replacement cost may not cover even 100 percent. And, with more than 5,000 homes destroyed in Sonoma County alone, coverage for temporary living expenses probably will run out long before a new house gets built.

“Californians hard hit by these disasters should not be hung up by insurance company red tape as they try to rebuild their lives,” state Insurance Commissioner Dave Jones said at a news conference in Sacramento last week. But they do.

A package of bills introduced by North Bay legislators would address some of the problems fire victims are experiencing. The proposals include:

SB 894 by state Sen. Bill Dodd, D-Napa, would give policyholders greater flexibility over how their total coverage is allocated. For example, those who didn’t utilitize their full coverage for temporary living expenses could use the unspent funds for rebuilding costs.

Dodd’s bill also would require insurers to cover temporary living expenses for three years instead of two and renew policies for two years instead of one following a disaster.

SB 897 by state Sen. Mike McGuire, D-Healdsburg, require carriers to pay out at least 80 percent of the maximum limit under a homeowner’s personal property coverage without requiring policyholders to itemize their losses.

AB 172, by Assemblywoman Cecilia Aguiar-Curry, D-Winters, would give policyholders three years, instead of two, to rebuild and collect full replacement cost.

AB 1797 by Assemblyman Marc Levine, D-San Rafael, would require insurers to offer a replacement cost estimate for rebuilding annually and new policies.

AB 1799, also by Levine, would require insurers to provide a copy of complete policy documents upon a policyholder’s request.

AB 1800, also by Levine, would require carriers to pay extended replacement cost coverage if a policyholder opts to rebuild or buy a house in another location.

AB 1875 by Assemblyman Jim Wood, D-Healdsburg, would require insurers to offer extended replacement cost coverage of at least 150 percent of the overall coverage limit.

They’re all worthy ideas, but only McGuire’s bill would apply retroactively (though some insurers agreed last week to pay victims of the 2017 wildfires up to 80 percent of coverage for personal losses without a complete inventory). The other proposals would only benefit victims of wildfires and other disasters in the future.

Those who were spared by the fires of 2017 should make sure they have adequate coverage; industry figures suggest that about 60 percent of American homes are underinsured. It’s also a good time to start working on an inventory of household belongings - and be sure to keep it in a safe place.