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Fire Causes Soon To Be Blamed For Insurance Company Claims Denial

Ruth's picture

Anyone who's already made the comparison of California wildfires to the Katrina disaster, probably also has had a little suspicion that more disaster will follow.

The insurance claims rejections after Katrina took the grounds that the policies didn't cover floods, and named anything they possibly could just flood damage. No, there wasn't a flood, but it fit the companies' needs so they invented one.

What will be the grounds for denying claims after the wildfires? I suspect some grounds will be arson. Who's insured for arson? And if your house was about to be repossessed, as so many California homes are, I suspect your fire damage might well be viewed as suspicious.

The insurance industry's plight has already begun to attract attention at the financial pages in the media.

Right now, thousands of dislocated Southern California homeowners are fretting about the fate of their residences, but the biggest headaches could come months after the wildfires ravaging the area are extinguished.

Consumer advocates warn that insurance firms could take a hard line with their policyholders in the wake of the wildfire disaster, by skimping on claim payments or going so far as to refuse to write new policies altogether.
At least for now, most consumers should not fear getting dropped by their insurance company. Under California law, insurance companies are required to renew their homeowner policies at least once if they live in a declared federal disaster area. After that term expires, insurers may then drop their clients.

Earlier Tuesday, President Bush declared seven California counties disaster areas.

In the end, some consumers may get dropped, warns Amy Bach, executive director of the California-based consumer group United Policyholders, which deals primarily with the insurance industry.

But, she added, even if some firms cut back in California, others may well step in. "Hopefully the market will [eventually] stabilize," said Bach.

The concept of insurance originally was shared costs for damages, with those who incurred losses making claims on the fund for repairs. The insurance industry instead has grown into a vast investment fund for shareholders. Denying claims, as the movie "Sicko" brought into sharp focus, is seen as loss control - not the purpose of taking out insurance.

The industry is making policies increasingly less desirable in all fields, and in healthcare particularly. Almost 50% of all bankruptcies result from losses to insured parties with medical problems.

Building in disaster prone areas has long been a drain on public funds, as floods, storms and fires have called for rescue. This may be a time to end public support for preventable disaster losses. We may soon be facing this necessity. Homeowners in California have a lot more facing them.

(This post also at )

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Submitted by [Please enter a... (not verified) on

I generally like your blog, but this is silly. I worked insurance claims for 30 years. I worked hurricanes side by side with FLOOD adjusters for people who had flood insurance. I honored the wind damage and they honored the flood damage. Failure to get flood insurance was the homeowners fault.

Fire is different. It is COVERED. Arson is not a reason to deny it unless it can be proved that the homeowner set fire to his own house (not very likely). The person will have replacement cost coverage up to the limit of his/her policy. They are not simple claims, but at the same point they are not overly elaborate. Bigger issue can come in trying to prove value of possessions, but that can also be resolved.

My point is you can't compare Katrina (a policy specifically excludes flood, wind driven rain etc., and has for decades) to wildfires.

I'm not saying all companies acted properly in Katrina, but neither did all homeowners. Most try to do the right thing, at least I did and my company did while I was there.

Ruth's picture
Submitted by Ruth on

Sorry, Tom, that you found it silly, but I worked as legal assistant in an insurance defense law firm, and I've seen a lot of manufactured grounds for denial. And it's s.o.p. here to look very closely at fires - particularly at restaurants - when owners were in trouble financially.

While I'm sure it's the practice of the best to honor claims, I've seen from both sides that any grounds to keep from paying out money is regarded as a 'loss control' measure.


Sarah's picture
Submitted by Sarah on

followed very quickly by the assets-management cabal of AllState and the "insurance industry".

AllState pulled out of the entire Gulf Coast after Rita.

The bean-counter mentality so beloved of "investors" is going to be the death of the insurance industry, finally. For the last 40 years, that "stop-loss" or "loss-prevention" mindset has caused insurance companies to lobby tirelessly, not for justice, but for cost reduction. That's why your car has air bags and seat belts, but will still start and run if your blood alcohol level is 1.9. That's why the states have laws mandating that you show PROOF OF INSURANCE to renew your inspection sticker and license plates (and in some states your driver's license). The vehicle can be a rolling pollution factory in a shambles of a condition, just barely a fraction of an RCH this side of a one-car wreck spewing smoke, and if you have a receipt from Esurance, you're good to go.
It's stupid.
It's venal.
It's killing us, in this country -- insurance, far more than taxation, is a ripoff, because you must pay the damned stuff to have a mortgage, a car loan, or the ability to go to the doctor unless you're mortally injured , but the Insurance Companies not only don't have to honor their contracts with you, the paying customer, they have whole departments dedicated to preventing the payment of your legitimate claims.
But, it puts money in GOP pockets, so it's all good ...

We can admit that we're killers ... but we're not going to kill today. That's all it takes! Knowing that we're not going to kill today! ~ Captain James T. Kirk, Stardate 3193.0

Submitted by [Please enter a... (not verified) on

Out here in the Good Washington, we are fighting to force the insurance companies to face penalties if they delay or deny legitimate claims. We are asking for triple damages and attorneys fees, just like we have in our general consumer protection act.

The insurance companies are fighting like you would expect - deceptive ads targeting trial lawyers, blatant lies, attack ads, the whole bit.

Wish us luck!

MJS's picture
Submitted by MJS on

the corporations with the tallest buildings win*!


*A tip of the mortal cap to Joseph Campbell, who said (paraphrased): The tallest building in a community used to be the Church, reflecting its primacy in holding and wielding power. In the Age of Reason the new center of power (the church's dominance was now over souls, not citizens) came to be secular governments, and so the tallest buildings were city halls, state capital buildings, etc. Today, the tallest buildings belong to banking institutions and insurance companies.

Do the math, for the math be done.


Ruth's picture
Submitted by Ruth on

Good luck, and let us know how that works out. Triple indemnity really makes sense.


We went through a loss in 2006. It's now been 2 years and we still don't have a roof. But we did get a settlement. We've talked to a man in our area who a tree fell on his house in a wind storm, and he didn't even get that. It seems they work to try to reduce your financial base, stalling to drag out the process as long as possible, and wait like vultures for you not to be able to make payments on your fire loss residence. By the second year, you're paying for an apartment plus your old residence, the insurance skyrockets during construction, and much more. If possible have the Property Loss at your mortgage company handle it. Ot you may find little accountability over how the repair money is spent. If we hadn't hired a public adjuster who obtained a Large Loss Claim I don't know what we'd have done. He charged 10% of the structure settlement, which amounted to $28,800 or something. We could not build till he was paid off. If you have a contents settlement, this can help pay the public adjuster for the structure settlement. Even with the PA's fees, we still did better than if we'd have it adjusted by the insurance company alone, who offers 1/2 or less than what you are entitled to. One man with a $619,000 loss was offered $219,000 by the insurance company. He was angry! He hired a PA and got the full $619,000. Either way it's not easy. A fire loss is very stressful. Farmers sends in fire damage professionals who charged nearly $70,000 in our case, and the public adjuster told them not to clean! They told us they just transported content.
We found fire damage professionals giving our belongings to one another. They claimed to use a dehumidifier. The machine was in the house. But when ever we dropped by it wasn't plugged in. There was high humidity due to fire hose water. We seriously question whether they ever used their equipment. Keep your eyes and ears open. Check out FarmersInsuranceGroupSucks.Com