Wildfires continue to affect communities throughout Los Angeles County, California, leaving unimaginable loss in their paths. Wildfire crises leave many questions and challenges for those affected, and, at Burns & Wilcox, we are here to help as the community approaches how to recover.
As some homeowners begin the process, navigating insurance claims may feel overwhelming. For brokers and agents in need of assistance to help clients understand their coverage, the team at Burns & Wilcox offers the following key steps and advice for moving forward. If you or someone you know needs assistance, our team is ready to provide guidance.
Impact and loss
As the wildfires continue to burn, the full scope of the overall impact is still being assessed, but it is enormous and devastating. At least 25 people have died, and more than 12,000 buildings and over 40,000 acres have burned. As authorities work to contain the flames, evacuation orders remained in effect for more than 150,000 residents.
“Our thoughts and prayers go out to all those affected, but it does not seem like enough. Our country is going to have to rally around these communities,” said Rick Sforzo, Senior Director, Claims Services, Burns & Wilcox, Atlanta, Georgia.
Our thoughts and prayers of course go out to all those affected, but it does not seem like enough. Our country is going to have to rally around these communities.
The fires could be among the costliest natural disasters in U.S. history, with entire neighborhoods as well as iconic LA landmarks and historic sites left devastated. “The fact that it is still ongoing and could even get worse is just incomprehensible,” Sforzo said.
As survivors begin to navigate the road to recovery, including filing claims with their insurance carriers, understanding the necessary steps to take after a loss is crucial. “This could take years to rebuild,” he said. “Take it one step at a time.”
First, find safety
When disaster strikes, safety always comes first, Sforzo said. It’s important that residents find safety and shelter for themselves and their families and make sure they are following all evacuation orders.
After residents’ immediate needs are met, then they can begin to assess the potential financial impact. Sforzo shared some steps and tips for that process.
Homeowners should get in touch with their insurance carrier to begin the claims process and find out what their Homeowners Insurance may cover. Many homeowners are also looking into the possibility of state or federal aid; as of Jan. 12, 24,000 residents had applied for assistance through FEMA, NPR reported.
Unlike flood disasters, fire is a peril that is usually covered by Homeowners Insurance, Sforzo explained. Unfortunately, an ongoing insurance crisis in the state — marked by soaring premiums and limited availability as insurers increasingly exit the marketplace — means many homeowners do not have coverage.
“That is the biggest concern for many individuals in California. Do they have insurance to cover their home, and if so, what would it cover?” he said. “Their insurance broker is probably the first resource. If they do not have insurance proceeds to rebuild, the devastation of starting from zero is difficult to comprehend. Hopefully they are safe, and they can lean on family, friends, and other resources to help them get back on their feet.”
After a home is destroyed in a wildfire, mortgage payments on the property are generally still due — a fact that may come as a surprise to homeowners facing a catastrophic loss for the first time. “My experience is that your payment does not stop. That is an aspect that a lot of individuals may not understand,” Sforzo said, noting that some may try to work with their lenders or even seek bankruptcy after this type of loss. “Those are all questions that are facing individuals going through this. It is just a very, very difficult situation.”
Navigating your insurance claim
The process of working through a Homeowners Insurance claim may be different than usual due to the circumstances surrounding wildfire losses. For example, for many homeowners, “there are no documents to gather; there is nothing left,” Sforzo said, adding that the same goes for submitting proof of damages.
“In a normal fire, there will be questions about what was lost and whether there are things that can be repaired as opposed to being replaced. In this case, most of the homes that were burned are likely total losses,” he said.
While a Homeowners Insurance policy covers a set amount for the structure based on the home’s insured value, a separate limit generally applies for a home’s contents. “That is where insurance companies probably need to understand that there are not going to be receipts,” Sforzo said. “Homeowners will have to do their best. Now is the time to start thinking about what was in your home — think through each room and try to document as much as you can.”
In a normal fire, there will be questions about what was lost and whether there are things that can be repaired as opposed to being replaced. In this case, most of the homes that were burned are likely total losses.
It may be reasonable to assume that a homeowner “maxed out” their limits on contents if the home is a total loss, he added. “Insurance companies will have to think seriously about how they adjust these claims to help the homeowners out, which is the goal,” he said. “I believe insurance companies will do their best to help out their insureds, and I think state regulators will ensure that they do.”
Next, homeowners will likely discuss debris removal, make decisions about rebuilding, and investigate selecting a contractor. Of course, with so many homes destroyed, “there may not be enough contractors to go around,” Sforzo said. Timelines should also be considered, as ground-up construction is “usually a nine- to 12-month process,” he said. Additional living expenses — such as payments for temporary housing and food while displaced from the home — are typically covered by Homeowners Insurance, though limits may vary.
Future insurance considerations
The decision to rebuild or relocate may be complicated, Sforzo acknowledged, in part due to the difficulty of obtaining insurance in the future. “If they could rebuild, could they get insurance for that home? There are all kinds of thoughts that the individual will have to decide,” he said. “Do I stay in this area? What are the risks going forward? What if this happens again?”
According to Wildfire Defense Systems, a Burns & Wilcox partner that specializes in wildfire mitigation and loss prevention services, many of the structures destroyed in the recent California fires were located in areas considered at “moderate” or “low” risk for wildfire — a sign that established underwriting tools for wildfire may need to be reviewed moving forward.
“Insurance companies are always going to look at risk and premiums to cover that risk,” Sforzo explained. “There is a very small percentage of individuals who can afford to not have insurance. All of us need insurance because of these types of events.”
Looking ahead, it will be important for states to partner with insurance companies to “create a marketplace” that addresses this need and helps consumers access coverage, he said. “The market in California is only going to be worse now with the billions of dollars in losses from these fires,” he said. “It has to be a partnership; something where the states work together with the industry to figure out a resolution.”
Avoiding scams and helping others
As homeowners work through insurance claims, aid applications and housing needs, they should be vigilant about scams. According to KABC, authorities are warning residents that scammers may try to impersonate relief organizations and collect upfront fees or pretend to be a charity that is raising money for victims. Contractors may also attempt to take advantage of wildfire victims by asking for deposits to guarantee a construction start date, the news outlet reported.
“It is always important to be careful,” Sforzo said. “Check their licenses, check the Better Business Bureau, and make sure they are qualified. Use your insurance company as a resource, as well.”
Meanwhile, those looking to help support wildfire victims should stick to reputable organizations such as the Red Cross, he advised. “The whole country wants to step up and help. Hopefully that will ease at least some of the financial burden,” Sforzo said.
Though recovering from a disaster can be a daunting journey, with knowledge and support, survivors can begin to rebuild their lives and communities.
“All of us at Burns & Wilcox and Kaufman Group just feel horrible for those who are affected,” he said. “My thoughts and prayers are with all those families. I think this is a time when our country has a history of helping, and I hope we can help those who need it and get them back to some normalcy.”
