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Wildfire Victims Sue Insurer for Underinsuring Them


Home Insurance   Home Insurance Leads  

Have You Made a Costly Mistake Underinsuring Customers as an Agent?

Wild fires devastated California this year, leaving many without homes. Unfortunately, some of these homeowners were grossly underinsured. A group of Santa Rose, California homeowners are suing CSAA Insurance Exchange CSAA Insurance Exchange for underinsuring their homes, which were destroyed in the recent California wildfires. The CSAA is the Northern California arm of the American Automobile Association.

 

The lawsuit claims that the CSAA committed negligence and fraud in its homeowner’s policies by underestimated the true cost of rebuilding after a natural disaster, according to a report by The Argus-Courier.

 

“These AAA insureds – as well as many other AAA insureds throughout the state – are woefully underinsured in the event of a fire loss and will be unable to rebuild their home,” said Greg Bentley, an attorney for the plaintiffs, according to The Argus-Courier.

 

One of the plaintiffs is Larry Spanier. He told the publication that CSAA estimated it would cost $1.3 million to rebuild his home. Spanier lost his home when it burned to the ground in the October fire. According to Spanier, he received estimates that put the rebuilding cost at closer to $2.3 million. Spanier said he even purchased 50 percent more home-replacement coverage than is recommended by industry advocates. Unfortunately, the Argus-Courier reports that still caps his overall insurance payout at $1.1 million, leaving him more than $1 million short of his actual rebuilding costs.

 

Third Lawsuit

CSAA is the third insurer to be sued by Sonoma County, California homeowners in relation to wildfires. Policyholders with other insurance groups have also launched lawsuits after finding themselves significantly underinsured.

 

New Homeowner Policies

The lawsuit against CSAA alleges bad faith on the part of the insurance company. It claims that CSAA made a change in 2016 that made homeowners responsible for more of the cost in the event of a major claim but did not properly inform policy holders of the major change made to their policies.

 

Before June 2016, CSAA homeowner policies had a maximum limit of structure coverage that “may be adjusted by renewal of this policy to an amount we estimate to be 100 percent of the replacement cost of the dwelling.”

 

However, after the policy change the insurer made policyholders responsible for updating the amount of annual coverage, they would need to rebuild their home based on current construction costs.

 

In a statement given to the publication, CSAA spokeswoman Sue Saito defended the insurer’s handling of wildfire claims without addressing the lawsuit.

 

“The majority of homeowners’ claims filed after the fire have been successfully closed,” she said. “Many of our customers have homes under construction, and some have already moved back into their houses. The 2017 wildfires had a devastating toll on our North Bay communities, and we will continue to take all of our policyholders’ concerns seriously as we help them move forward.”

 

Your Part as an Insurance Agent

As a home insurance agent, it is your job to educate policy holders on new policies. It is also your job to educate homeowners on the best coverage options for them. Don’t leave your clients underinsured or you could be facing a lawsuit.

 

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