The California Department of Insurance (“DOI”) has issued a notice to insurers requesting they extend additional living expense (“ALE”) coverage by a full year to survivors of the 2017 North Bay Fires whose additional living expense benefits will expire within months.
ALE coverage typically includes food and housing costs, furniture rental, relocation and storage, and extra transportation expenses while a home is uninhabitable.
The DOI also issued a second notice requesting that insurers not deduct the land value when survivors who suffered a total loss choose to purchase a new home in a different location. Many insurers deduct land costs, reducing the amount that a homeowner can receive.
New state laws extended living expense coverage from 24 to 36 months, but did not apply to survivors of the October 2017 fires that destroyed 5,300 homes and caused more than $12 billion in losses across five counties. Senate Bill 894, Assembly Bill 1800, and Assembly Bill 1772, which increased the 24-month mandatory ALE coverage period to a minimum of 36 months, became effective on September 21, 2018.
“With labor shortages and other outside factors delaying the rebuilding process, time is running out for many who lost their homes in the 2017 fires,” Commissioner Lara said. “I urge insurers to show good faith with their policyholders by extending living expense payments to those who have endured so many delays beyond their control.”
According to local officials, Sonoma County and the City of Santa Rosa have processed 2,814 permits for homes, representing 55 percent of the 5,143 homes destroyed in the fires. To date, 399 homes have been finished.
The deduction of the land value from the cost of purchasing a home at a new location creates another complication for some survivors, the DOI said.
California law allows those who suffer a total loss to use insurance to rebuild in the original location, rebuild in a new location, or to relocate to a replacement home. The DOI said that it has received complaints from policyholders who chose to relocate that their insurer deducted the estimated land value of the new home from the overall replacement cost payment, leaving policyholders with less than the full amount of their benefits they would have been due if they rebuilt the home.
“Allowing policyholders to purchase an already existing home without having insurers deduct the value of land will greatly help wildfire survivors throughout California rebuild their homes and lives,” Commissioner Lara added.
The DOI said that it has received more than 600 formal complaints as a result of the 2017 North Bay Fires.
Learn more: Deduction of Land Value Notice; ALE Notice
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].