Thousands Of Wine Country Wildfire Claims Jolt Insurers
Oct. 19--Northern California's Wine Country wildfires have already sparked several thousand claims with insurance companies, and experts warn the claims process ahead could frustrate many home and vehicle owners.
Two big insurers alone -- Farmers Insurance and State Farm Insurance -- have received at least 6,600 claims in connection with California's infernos. The vast majority of those are linked to the blazes in the North Bay for homeowners' insurance claims, officials with both insurers said Wednesday.
Homeowners now face a forbidding journey to recoup losses from their insurers. The speed of reimbursement could be slowed if insurers' capital is spread too thinly among the fire claims and other recent natural disasters, and homeowners may have unrealistic expectations about reimbursement without having read into the fine print of their policies, experts warn.
"Fire insurance claims processing is particularly labor intensive," said Ivo Labar, an attorney with San Francisco-based Kerr & Wagstaffe, a law firm whose specialties include insurance law. "We will see a lot of delays and a lot of unhappy homeowners in the coming months."
Even worse, other recent natural disasters, including brutal hurricanes that drenched Texas and Florida and ravaged much of Puerto Rico, may pinch the reserves of even major insurers, warned Lydia Ortega, a professor of economics at San Jose State University.
"No insurance company could have imagined something of this magnitude," Ortega said. "Even with all their goodwill, it's possible the insurance companies will not be able to make the process relatively painless. If their estimates fall short of predicting the magnitude of this, they might not be able to pay fully. The sheer scope of this could not have been predicted."
Based on the experience of one insurer, State Farm, the number of claims could soar beyond current levels.
On Friday, State Farm reported it had received 2,100 homeowners' insurance claims connected with the California wildfires, along with 800 automobile claims. By Wednesday afternoon, State Farm said the numbers had climbed to 3,060 homeowners' and 1,090 vehicle claims.
"State Farm deals with catastrophes throughout the country year round," said Sevag Sarkissian, a State Farm spokesman. "This is what insurance is for. This is what State Farm is prepared for. We are responding to customers' needs in the North Bay region and around the country."
Farmers Insurance said that as of Wednesday, it had received more than 2,500 claims in connection with the wildfires in the North Bay. The vast majority of those were homeowners' claims and a few were for automobiles, said Carly Kraft, a Farmers spokeswoman.
"So far, we've deployed more than 130 additional claims staff into the area to help expedite the claims process," Kraft said. "We have had several relief sites open for customers to file their claims and speak with their agents."
Mercury Insurance said it had decided to release no details on claim numbers, said Shane Smith, a media representative for Mercury.
"The insurance industry constantly prepares for disasters," said Janet Ruiz, a spokeswoman for the Insurance Information Institute. "We have experts, we have disaster and catastrophe teams already on site."
Ready or not, however, a mammoth bill could await insurers.
"The damages are in the billions, just looking at the number of homes destroyed and the traffic loss of life," said Gerald Singleton, an attorney based in the San Diego suburb of Solana Beach and an expert in wildfire-related litigation.
Insured claimants shouldn't think the process will necessarily go smoothly even if they quickly receive a check from the insurance company, warned Labar.
"They get that initial chunk of money, then three to six months, even more pass," Labar said. "Then the biggest shock can come when they realize they have reached the policy limits and their policy won't be enough to replace the house."
Part of the problem is certain presumptions that people often have about their homeowners' insurance policies.
"People have an incredible misconception that their policies were written to replace their homes," Labar said. "Most policies don't provide that. People are often greatly under-insured."
Another problem is insurance companies might not finish paying off the claims until the homeowners pay their contractors, and then the payments are based on what the insured customers have actually paid out to the construction crews, Labar said.
"If insurance companies are not able to pay fully, then they will begin delaying the payments," Ortega said. "They will become more careful and more meticulous in estimating the payments. At that point, every dime counts."
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