“My broker told me….” is a common start to almost every caller who has contacted Merlin Law Group’s California office regarding a potential claim for business interruption damages due to the COVID-19 pandemic. California was the first state to issue a stay-at-home order on March 19, 2020, under Governor Newsom’s Executive Order N-33-20. On that date, many non-essential businesses were forced to temporarily stop operations with the goal of limiting the spread of the novel-coronavirus and ensure healthcare systems were not overwhelmed.
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In 2019, Merlin Law Group’s California offices received calls almost daily from insureds who were “dropped” by their homeowners insurance company (i.e., non-renewed). The reason insurers are providing? Unsurprisingly: increasing risks of wildfires. In November 2019, Ricardo Lara, the California Insurance Commissioner, exercised his powers to place a one-year moratorium on cancelling insurance policies related to wildfire risk. Earlier in the month, Lara ordered the FAIR Plan—a quasi-governmental insurer-of-last-resort for people who can’t get insurance elsewhere—to sell the same kind of policies for which Californians once had no problem qualifying.1
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In 2017 and 2018, California experienced devastating wildfires, during which thousands of structures, homes, and businesses were destroyed. California insurers scrambled to adjust the thousands of claims but it was quickly recognized that they were not prepared to timely handle losses due to a large-scale natural disaster. The California legislature responded, enacting several amendments to the law extending the time policyholders had to collect additional living expenses and replacement costs.
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Most homeowners are surprised to learn that almost all homeowners’ policies include exclusions for damage caused by sewage water originating outside their home. For example, if your city or county’s sewer main line backs up because of tree roots or debris and the sewage water backs up into your home, the resulting damage will not be covered, or if it is, may be subject to significant limits—often covering only $5,000 or $10,000 of damage. Given the scope of cleaning required in these events, this amount will likely not cover even the costs to clean up the sewage. What’s more, some policies even exclude backups on the homeowner’s own lateral lines. Insurers may offer policy endorsements for coverage at an additional cost, but as many homeowners shop based on price alone, they may not realize they lack the coverage until it is too late.
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California’s Senate Bill 2401 is making its way through the legislature and will hopefully bring some important changes to the way insurance companies train their out of state adjusters who handle California based policyholder’s claims. The bill, also known as the Insurance Adjuster Act of 2019, was created by Senator Bill Dodd to eliminate confusion and delays caused by out-of-state or unaware adjusters.
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I often receive calls from policyholders asking how an insurance company can deny their claim based on an exclusion that isn’t defined in the policy. One of these terms is “surface water,” a common exclusion found in most policies. Recently, I had a client whose home’s gutter system malfunctioned during a rainstorm. Rather than channeling water to run from his roof, through the gutter system and out to the street, water was redirected at the side of the home. The water filled up a planter built in to the side of the house and eventually made its way into the home, damaging his flooring.
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Hurricanes, tsunamis, and earthquakes are the most common natural disasters to impact the State of Hawaii. The 2018 Hawaii hurricane season was one of the most destructive in recent memory, with six hurricanes hitting the islands. 2018 also brought the lower Puna volcano eruption.
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Losses from wildfires across the United States over the past decade have added up to $5.1 billion.1 In addition to damage typically expected from fires (smoke, soot, ash, water from fire-fighting hoses and extinguisher chemicals), some homeowners may face the additional risk of damage caused by suppression efforts, specifically aviation-based firefighting.
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Are California homeowners entitled to collect actual cash value (“ACV”) or replacement cost values (“RCV”) for property claims? It depends on what type of policy you have and whether you suffered a total or partial loss of your property. What’s more, in a few weeks, the California Assembly may vote to change existing law. To understand what homeowners are entitled to, we must first determine whether the policyholder has purchased an RCV or ACV policy and to analyze impact of depreciation.
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