The 2025 California wildfires destroyed over 11,000 homes and displaced more than 80,000 people. Kantor & Kantor LLP wants to educate wildfire victims about the best steps to take as they navigate the complexities of insurance claims and recovery. Here is a list of frequently asked questions about CA wildfire insurance claims.
Homeowners’ Fire Insurance Coverage Types
What are the different types of coverage I am entitled to in my homeowner’s (fire insurance) policy?Homeowners’ fire insurance policies typically include four distinct types of property loss coverages:
- Coverage A: Dwelling – This coverage insures the primary residence itself, protecting the structure from various risks.
- Coverage B: Other Structures – This part covers additional structures on the property, such as workshops, detached garages, and similar buildings that are not attached to the main house.
- Coverage C: Personal Property – This coverage protects personal belongings, including items in the home, vehicles, and other structures on the property.
- Coverage D: Loss of Use – This coverage addresses situations where the home becomes uninhabitable due to a covered loss. It includes Additional Living Expenses (ALE) to help with temporary accommodations and Fair Rental Value for properties that were being rented out.
You may have lost your insurance documentation in the fire, but your insurance agent will have this information and can explain your specific coverage.
Fire Insurance Coverage Values
Will fire insurance pay to replace my home?When considering fire insurance for a home, it is essential to understand the concept of “Actual Cash Value” (ACV). With this minimum value, the payout will be either the policy limit (Coverage A) or the home’s fair market value, depending on which is lower. For partial losses, the coverage should account for the costs associated with repairing, rebuilding, or replacing the property, adjusted for any physical depreciation [CA Ins Code § 2051 (2024)].
Many insurance policies also offer Replacement Cost coverage. This type of coverage ensures that homeowners are compensated for the expenses necessary to repair, rebuild, or replace their property without factoring in depreciation [CA Ins Code § 2051.5 (2024)].
There are three primary types of Replacement Cost Coverage:
- Guaranteed Replacement Cost – This coverage is not restricted by policy limits.
- Extended Replacement Cost – This includes limitations defined by the policy’s stated limits, plus specified percentage increases.
- Replacement Cost – This is subject to the stated policy limits.
Most insurance policies are sold with Extended Replacement Cost coverage. Homeowners should check their policy and Declarations Page, as it may indicate a percentage range for extending insurance coverage, typically between 10% and 50%.
Answer:Actual Cash Value, which represents the fair market value, may not be sufficient to cover the costs of rebuilding a home. This is because a newly constructed home is fundamentally different from an existing one that has experienced wear and tear and depreciation. Homeowners are entitled to receive the actual cash value of their home regardless of whether they choose to proceed with rebuilding. Replacement Cost coverage should provide enough to rebuild your home, depending on your specific policy. Check with your insurance agent about your policy coverages.
Insurance Agent Obligations
What is the obligation of an insurance agent to disclose if someone’s home is underinsured both from the beginning of signing up for a policy and over time when property values increase?Many homeowners are discovering that their insurance policies do not provide adequate coverage to rebuild their homes fully. For instance, a policy may cover up to $200,000, but the actual cost to rebuild could be as high as $800,000. Over time, property values increase, and the rebuilding cost may also rise.
Is the insurance agent obligated to inform the homeowner that their policy may not be enough to cover a complete loss, such as a fire that destroys the house? Should the agent proactively suggest a review of the coverage if it has been 20 years since the homeowner last adjusted it to ensure they are adequately insured?
Answer:In many states, insurance agents are not legally obligated to assess their clients’ coverage needs, inform them about all available options, or suggest specific levels of insurance. Additionally, agents are not required to proactively monitor their clients’ situations for changes that might necessitate adjustments in coverage. Individuals should review California’s regulations or consult with a knowledgeable attorney for more information.
Policy Limit Payout Obligations Under a State of Emergency
What is the obligation of the insurance company to pay out policy limits on total loss situations when a state of emergency is declared?Insurance companies typically require receipts or proof of items for personal property claims. However, if a state of emergency is declared and someone’s home is burned down, it’s likely that they may not have documentation for all of their lost items, or they could have lost that documentation along with their belongings in the fire. In such cases, does the insurance company have an obligation to pay out the full personal property coverage limit, given the circumstances of the state of emergency?
Answer:When a state of emergency is declared and a total loss occurs, an insurance company is generally obligated to pay out the full policy limits as stated in the insurance contract. This means the policyholder will receive the maximum amount of coverage for their damaged property, including in situations where the damage is considered a total loss; this is subject to the specific terms and conditions of the policy and state regulations.
Also, under existing California law, policyholders who suffered a total loss are legally entitled to certain advance payments on their claims. California Insurance Commissioner Ricardo Lara issued a bulletin on January 23, 2025, addressing Consumer Protections for Wildfire Survivors, Including Advance Claim Payments.
Always carefully review your insurance policy to understand the specific coverage details related to total loss situations and state of emergency declarations.
Insurance Claim Response
How long should it take to receive an answer for my insurance claim?With so many claims to process, insurance companies may be overwhelmed with damage claims. However, California law governs the time allowed to process a claim and how they must handle any delays [California Code of Regulations, Section 2695.7 (b)-(f)].
Answer:Insurers are required to respond to claims within a specific timeframe. Within 40 days of receiving a claim, they must either accept or deny it, either fully or partially. This response must be provided in writing, along with a clear explanation for any denial. If the insurer requires more than 40 days to make a decision, they are obligated to inform the claimant of the reasons for the delay and must provide written updates every 30 days thereafter. Additionally, insurers have a responsibility to inform claimants at least 60 days in advance of any deadlines that could affect the claim, such as the statute of limitation deadlines.
Get the Legal Help You Deserve
At Kantor & Kantor, our primary focus is on ensuring that you receive the support and guidance necessary for your well-being and recovery. We prioritize your needs over profit, emphasizing that you are not alone in this journey. Our team is dedicated to assisting you every step of the way. Contact us to learn more.
