Altadena, CA – Insurance companies are reportedly slow to compensate or underpaying claims related to the devastating wildfires that blazed through Altadena and Pacific Palisades earlier this January. Plaintiffs’ attorneys have voiced concerns, pointing to more severe issues in cases where properties did not suffer complete destruction.
The pattern has been noted to be particularly problematic when the damage isn’t fully apparent upfront, warning that the issue might escalate as the total damage becomes more evident. The high costs associated with litigation may deter many homeowners from pursuing legal action for unreimbursed claims, especially when the disputed amounts, such as $50,000 for property damages or lost contents, don’t justify the financial and emotional costs of a lawsuit.
In the midst of these challenges, some lawyers suggest that mass torts, leveraging commonalities among multiple affected parties, could provide a viable path forward. However, up to now, no such lawsuits have been reported.
One case drawing attention is the Eaton Fire, with damages estimated at over $10 billion according to insurance assessments. Further complicating the plight of homeowners, a recent decision by a California appellate court has raised more barriers for policyholders seeking redress. The court ruled against homeowners from the 2019 Saddle Ridge fire, stating they couldn’t claim property damage losses as they failed to prove enduring alterations to their properties due to smoke and soot.
Adding to the narrative, State Farm has been particularly singled out by clients and attorneys for the challenging and stringent claims process, especially in the aftermath of the Eaton and Palisades fires. Policyholders described the experience as frustrating, mentioning the insurer’s requirement for detailed itemizations of damaged home contents before processing claims. Despite these criticisms, State Farm highlights its deployment of extensive claims force in response to the fires. The company asserts having processed over 12,000 claims related to the fires and compensated upwards of $2.2 billion to their customers.
Concerns extend beyond the immediate fire damage, as highlighted by Shant A. Karnikian of Kabateck LLP. One client, a doctor who understands the risks of residing in a home tainted by chemicals and smoke, was reportedly denied coverage for remediation because the damage was not considered physical. Karnikian emphasized the need for clarity on how insurance definitions and policies interpret property damage on a chemical or molecular level.
The battle isn’t unique to wildfire claims. Businesses faced similar roadblocks during the Covid-19 pandemic, where insurers won a majority of cases by arguing that the virus did not cause permanent physical damage to properties.
In response, law firms like Reed Smith LLP are stepping up to provide resources and guidance to wildfire victims. The firm instituted an online portal to assist individuals in navigating insurance policies and has directly helped approximately 580 people through this initiative.
Benjamin Fliegel, a partner at Reed Smith, points to a significant discrepancy between the actual costs of cleaning and repairing damaged properties and the amounts insurers are willing to pay. He expressed concern that policyholders, particularly less informed ones, might accept less than what they are rightfully owed.
As the legal and insurance landscapes continue to unfold, the need for vigilance and advocacy for policyholders becomes increasingly apparent, prompting calls for clearer insurance practices and fairer claim settlements.
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