While we all continue to deal with the effects and impacts of the COVID-19 pandemic, the western part of our country is now experiencing almost unprecedented wildfires. Over the last two weeks, the west coast has been devastated by wildfires with more than 4.7 million acres burned. Given the widespread devastation losses will likely be in the billions. The large scope of damages will have a drastic impact on insurers both from a potential loss perspective and from substantially increased demand on insurers to adjust claims within statutory time limits for each state.

The anticipated demands on insurers to quickly and efficiently process wildfire claims is exacerbated by a recent emergency notice from the California Insurance Commissioner. On August 26, 2020, the California Insurance Commissioner issued an emergency notice urging insurers to expedite handling of wildfire loss claims and to provide greater flexibility in the handling of claims including the following:

  • Provide a minimum four-month advance payment of Loss of Use, Fair Rental Value, or Additional Living Expense.
  • Allow a minimum 60-day billing grace period to allow for any lost or destroyed renewal notices.
  • Advance payment of at least 35% of limits for personal property without the need to complete an inventory,
  • Accept an inventory on non-company specific forms as long as it contains substantially the same information as the company form.
  • Expedite payment of vehicle damage claims covered under comprehensive loss coverage.
  • Cooperate with consolidated removal efforts coordinated through city, country, and state agencies unless the insurer can provide debris removal more rapidly.
Given the scope of the known and anticipated losses in California, this emergency notice will put additional pressure on the already strained resources that insurers are faced with in light of the COVID-19 pandemic. While not a requirement, this emergency notice may also have the effect of increasing the likelihood of inflated and/or fraudulent claims. The notice provides almost identically to legislation currently on the California Governor’s desk. SB-872 (residential property insurance: state of emergency), which is intended to go into effect in January 2021 for all fire loss claims where a state of emergency is declared. This proposed legislation also raises several issues that insurers need to be aware of. Importantly, with respect to land value, current California law provides that policy holders have the right to buy or rebuild a total loss at a different location. Because insurers do not insure land value, some insurers have read this law to allow for the deduction of land value. This new law expressly prohibits that practice.

It is likely that Washington and Oregon will issue similar notices in the near future in light of the similar scope of losses in those states. Regardless, we anticipate another substantial round of Business Interruption claims as a result of the wildfires. In light of the fact that hundreds of people have been forced into shelters due to evacuations, there also is likely to be an increase in COVID-19 related claims. More importantly, the present impacts of the COVID-19 pandemic will necessarily impact the adjustment and resolution of wildfire claims as resources and necessary activities are all still curtailed in the current environment.

As a result of the large number of losses and requests to expedite adjustment, the threat of inflated and/or fraudulent claims is increased. Therefore, it is important that insurers proactively investigate, adjust, and seek consultation from appropriate professionals as early as possible in the claims process. This includes retaining and seeking opinions from construction/remediation professionals, cause and origin professionals, financial/accounting experts, and, when necessary, legal advice from coverage counsel whenever concerns arise.

Lether Law Group has been handling large first-party property losses for over 32 years. This includes large fire loss and wildfire claims. If you would like to discuss these recent developments or any other matters, please feel free to contact us at any time.

The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.