Category: Homeowners Insurance

Flood Insurance Claim Tips

Following several weeks of storms and heavy flooding in Washington State, the state Insurance Commissioner released a list of tips for homeowners dealing with flood losses under their insurance policies. Flood insurance is challenging, so the Insurance Commissioner’s advice should be helpful to policyholders affected by the flooding.

The upshot is:

  • Most homeowner’s and renter’s insurance policies do not cover flood damage.
  • Flood insurance is available through the Federal Emergency Management Agency’s National Flood Insurance Program.
  • NFIP policies come in two types. The first type of policy covers flood damage to the building, such as the foundation, electrical wiring, flooring, etc.
  • The second type of NFIP policy covers flood damage to personal property like appliances, electronics, and other personal belongings.
  • Homeowner’s affected by flooding who don’t have flood insurance coverage may be eligible for federal emergency grants or loans.

 

 

 

 

Deadlines in Policy Fine Print Can’t Cut off IFCA Rights Says Court of Appeals

Washington’s Insurance Fair Conduct Act (IFCA) protects policyholders from insurers’ unreasonable refusal to pay covered losses or provide insurance policy benefits. Unfortunately, many insurers include fine print in the insurance policy contract that supposedly provides the policyholder cannot sue the insurer once certain time period has passed since the loss. These time periods are typically much, much shorter than statutes of limitations, and are often as short as one year.

Insurers often claim this language lets them off the hook for violating policyholders’ rights under IFCA or other laws once enough time has passed. This is particularly problematic because insurers often drag out disputed insurance claims for as long as possible. Accepting these insurers’ arguments would allow insurers to immunize themselves from suit by simply stalling until the deadline runs.

Can they do that?

Fortunately for Washington State policyholders, our Court of Appeals recently said “no way.” On January 13, 2020, the Court of Appeals decided West Beach Condominium v. Commonwealth Insurance Company of America, ruling that the deadline in the insurer’s fine print could not bar the policyholder from pursuing IFCA and similar consumer protection claims.

West Beach, a West Seattle condo owners’ association, had insurance coverage for the condo complex through Commonwealth Insurance. West Beach found substantial water damage in the condo complex and made an insurance claim with Commonwealth on September 26, 2016.

In March of 2017, Commonwealth denied coverage. Commonwealth claimed that the water damage had been happening for the past ten years. Commonwealth’s insurance policy contained fine print requiring West Beach to sue within a year after the loss, i.e., within a year after the initial water damage.

West Beach sued, alleging that Commonwealth breached the insurance policy contract. West Beach also sued under IFCA and Washington’s Consumer Protection ACT (CPA). The lower court dismissed the entire lawsuit because the claimed damage occurred more than one year before West Beach filed suit.

The Court of Appeals reversed and ordered that the lower court should not have dismissed the IFCA and CPA claims. Commonwealth claimed on appeal that by failing to file suit by the contractual deadline, West Beach gave up its right to any insurance coverage. Therefore, Commonwealth argued, West Beach had no right to bring IFCA or CPA claims because it had given up its insurance coverage.

The Court of Appeals determined the suit limitation clause only prevented West Beach from filing a very specific type of claim for breach of the insurance policy contract. But, the court ruled, Commonwealth could not use the contractual deadline to immunize itself from suit under IFCA and the CPA. These statutes give policyholders rights that do not go away merely because the policyholder missed a deadline buried in the insurance policy.

The West Beach decision is important because it preserves policyholders’ rights under Washington’s consumer protection statutes. These laws exist to protect Washington policyholders from sharp practices. Allowing insurers to exempt themselves from these laws simply by adding arbitrary deadlines to their insurance policy fine print would allow insurers to circumvent these protections by using the very type of sharp practice these laws exist to prevent.

Wildfires Making Insurance Coverage Hard to Get – California Expands State Coverage Fund

California recently announced new wildfire insurance rules that might be a glimpse into the future for Washington State homeowners having trouble getting insurance coverage in wildfire-prone parts of Washington. California’s new rules help people who can no longer get homeowner’s insurance coverage due to increased wildfire risk. The new rules expand a California state-run program acting as the insurer of last resort for homeowners living in areas at high risk of wildfires.

Like Washington and Oregon, California has seen significant damage from large wildfires in recent years. This has caused many insurance companies to cancel homeowner’s insurance policies for homes in high-risk areas. Even where coverage remains available, premiums have increased significantly. Many California homeowners have complained about being abruptly dropped by their homeowner’s carriers, or facing exorbitant price increases. In 2017 and 2018, California wildfires caused over 124,000 claims and about $26 billion in losses. Like other mass-disaster claims, wildfire insurance claims are often difficult due to the scope of the losses and the size of the claims.

California’s Fair Access to Insurance Requirements (FAIR) plan collects contributions from California insurance companies to support a fire loss coverage fund. Starting in April, FAIR will cover up to $3 million in damages, and will eventually be expanded to cover other non-fire liabilities, such as water damage or personal liability, typically covered by traditional homeowners insurance. The goal is that homeowners covered by FAIR should have adequate coverage without having to buy additional insurance.

The move was, predictably, applauded by consumer advocates but criticized by the insurance industry, which said the changes could hurt consumer choice.

Five Common Homeowner’s Insurance Policy Provisions and Why They Matter

Most folks have homeowner’s insurance (or its cousin renter’s insurance).  Homeowner’s insurance protects you from damage to your home (e.g., your house burns down) or from claims arising from someone’s injury on your property. (e.g., someone slips and falls in your backyard).

Homeowner’s insurance policies typically contain about 20 pages of fine print.  Depending on the specific language, your coverage and your duties after a loss can vary dramatically.  Here some common important provisions to look for and why they matter.

1.  Provisions defining the covered property. The address on the declarations page may not necessarily identify the property covered by the insurance policy.  For example, if you aren’t living in the property, the policy may not provide coverage even if the property is listed on the declarations page.  Some policies contain owner-occupancy provisions stating, for instance, “this policy covers the owner-occupied property listed on the declarations page.”

2. Provisions explaining what parts of the property are covered.  In addition to the main house, homeowner’s policies often provide additional coverage for ancillary structures on the property like sheds or garages.  Some policies provide coverage for all other structures on the property regardless of whether they were attached to the main house.  Other policies limit coverage to only structures that are physically connected to the house.

3. Business Use Coverage.  Insurers often deny coverage where the property has been used for business purposes.  The policy fine print is important to understanding whether and to what extent the property’s use for business purposes allows the insurer to deny claims.  Some policies exclude any use of the property for business purposes such as renting the property out to tenants or running an office at the property.  Others only exclude business use from specific coverage; for instances, renting the property to tenants might exclude claims if the tenant sues you because they slip and fall, but might not exclude coverage if the property burns down.

4. “Actual Cash Value” versus “Replacement Cost Value”.  If your house burns down, there are two ways to evaluate the dollar amount of your loss.  One way is to ask what the house was worth right before it burned down; this is the “Actual Cash Value.”  Another way to look at the loss is to ask what it would cost to rebuild the house; this is the “Replacement Cost Value.”  Typically, Replacement Cost Value is much higher than Actual Cash Value.  Your homeowner’s insurance policy will have detailed provisions for when the insurer pays Actual Cash Value versus Replacement Cost Value; often, the insurer will pay Actual Cash Value up front, then pay the remainder of the Replacement Cost Value once you complete repairs or replacement.  But insurers often miscalculate the Actual Cash Value, leaving you without sufficient funds to repair or replace the property and thereby stopping you from collecting the additional Replacement Cost Value.  It’s important to read these policy provisions carefully and make sure the insurer follows them.

5.  Additional Living Expenses.  Many homeowner’s policies cover your Additional Living Expenses, i.e., the extra costs you incur because you can’t use part of your home while it is damaged.  Additional Living Expenses might include living in a hotel while your home is repaired.  The specific policy language is critical because insurers often dispute whether an insured is entitled to Additional Living Expenses after a covered loss.  For example, if a fire is put out before it burns down your home but the home is full of smoke and water damage, is the property “liveable?”  What if the only damage is to the living room but you can’t use the entire first floor of your house during the repairs?  Understanding the specific policy language is important to knowing your rights in these situations.

Ultimately, the only way to know for sure what your rights under an insurance policy are is by consulting an attorney.  Hopefully, this guide can point you in the right direction.