San Diego wildfire victims angry at insurers

San Diego wildfire victims angry at insurers

23 October 2008

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USA — California’s insurance commissioner has ordered his auditors to examine how insurance companies handled claims from last year’s devastating wildfires amid allegations from homeowners that some insurers misled them about how much coverage they needed.

“We’ll be looking for patterns of behavior by insurance companies, of stalling, not paying claims fully and putting up barriers,” said Steve Poizner, the commissioner, adding that his agency has already persuaded insurance companies to pay $13 million in disputed claims from the 2007 fires.

But homeowners who lost their homes in the Witch Creek fire last October said at a news conference Wednesday that some insurance companies had misled them before the wildfire about how much coverage they needed to fully rebuild their homes.

Karen Hoy, who has only rebuilt the foundation of her 2,100-square-foot Escondido home, said her insurance agent told her in 2004 that she had enough protection to fully rebuild. Now, Hoy says, her insurer is offering her $200,000 less than the full cost to rebuild.

United Policyholders, the insurance consumer group that held the news conference, said only 100 of 1,600 homes burned last fall have been rebuilt—in part because of problems with underinsurance.

“We should not have to fight for everything,” said Stephen Stout, who hasn’t started to rebuild his 28-year-old home. “It’s a never-ending nightmare.”

Yet Tully Lehman, a spokesman for the Insurance Information Network of California, said the problem of underinsurance following last year’s fires doesn’t seem to be too widespread.

He said insurers have already settled 91 percent of about 35,000 claims from last year’s fires and less than one-fifth of complaints received by the California Department of Insurance have involved allegations of underinsurance.

And insurers should not automatically be blamed if a homeowner finds their coverage falls short, said Sam Sorich, a lobbyist in Sacramento for the Association of California Insurance Companies.

Some policyholders may fail to ask their insurers to raise their coverage after remodeling kitchens, adding rooms or making other major improvements to their homes, he said.

Poizner also promised to hold public hearings to gather information for proposed legislation that would address the problem of underinsurance claims after a major disaster.

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