Our Northern California office is battling the big insurers for their conduct in response the 2017 NorCal Wildfires, and recently some of our clients received letters purporting to be a “friendly reminder” from their insurance company. Well, they were actually not so friendly. Instead, they are kind of a punch to the gut.

The letter I am referring to was sent by USAA insurance, who we all know markets themselves as providing above-average service to some of our most honored citizens, servicemembers and veterans. The letter explains its purpose as follows:

We write this letter to summarize the current status of the claim and as a friendly reminder regarding various time related obligations you have under the policy governing your claim.

So, the letter is a “friendly reminder” about deadlines, right? Wrong. It is a sugar-coated gut-punch stating that sorry, you are out of time to rebuild or replace. These letters are dated more than two years after the anniversary of the wildfires, and they go on to state:

In order to recover additional amounts under your homeowners policy or any endorsements, including the Home Protector and recoverable depreciation under the replacement cost coverage, you must complete the actual repair or replacement of the damaged property within 2 years of the date of loss, unless during this time, you send us a written request for an extension for an additional 180 days to complete the repair or replacement.

USAA could have sent this “friendly reminder” a few months before the two-year deadline. Then it really would have been “friendly,” because it could have actually given insureds meaningful insight into what next steps they should take. But instead USAA waited until after, when there is nothing the insured could do except realize they are out of luck.

But that’s not all! It is not even true that an insured has two years from the date of loss to rebuild! The statement itself is an egregious misrepresentation of California law. California Insurance Code Section 2051.5(b)(1) provides:

(b) (1) Except as provided in paragraph (2), no time limit of less than 12 months from the date that the first payment toward the actual cash value is made shall be placed upon an insured in order to collect the full replacement cost of the loss, subject to the policy limit. Additional extensions of six months shall be provided to policyholders for good cause. In the event of a loss relating to a “state of emergency,” as defined in Section 8558 of the Government Code, no time limit of less than 24 months from the date that the first payment toward the actual cash value is made shall be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit. Nothing in this section shall prohibit the insurer from allowing the insured additional time to collect the full replacement cost.

Equally bad, USAA’s letter is in direct contradiction to the California Standards For Prompt, Fair and Equitable Settlements, which requires it to give sixty (60) days notice before any deadlines run:

(f) Except where a claim has been settled by payment, every insurer shall provide written notice of any statute of limitation or other time period requirement upon which the insurer may rely to deny a claim. Such notice shall be given to the claimant not less than sixty (60) days prior to the expiration date; except, if notice of claim is first received by the insurer within that sixty days, then notice of the expiration date must be given to the claimant immediately.

So, what is happening here, in sum, is that USAA is giving its clients a “friendly reminder” that effectively says they are out of time to rebuild or replace, when they are in fact not. How can this be allowed to happen?

When we raise this argument in lawsuits, carriers point to the California Fair Claims regulations at 10 C.C.R. § 2695.4(b), which says:

(a) Every insurer shall disclose to a first party claimant or beneficiary, all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by the claimant. When additional benefits might reasonably be payable under an insured’s policy upon receipt of additional proofs of claim, the insurer shall immediately communicate this fact to the insured and cooperate with and assist the insured in determining the extent of the insurer’s additional liability.

Carriers point to this and say, well, we only have to tell you what the policy says, not what California law says. That is, frankly, astonishing, and dead wrong. The key language in this regulation is “that may apply to the claim presented by the claimant.” Thus, it does not matter what the policy says if what it says will not actually apply to the claim. USAA is well-aware that their policy language is trumped by California law and will never apply to the claim.

This is not the first example of a letter like this, but it is the most shocking we’ve seen given its timing in relation to the two-year anniversary of a massive disaster that destroyed so many lives.

So why does this keep happening? The only entity who can legally enforce compliance with the California regulations is the Commissioner of Insurance, and the Commissioner of Insurance has done nothing to stop letters like this. In court, attorneys can cite to the violation of a regulation as evidence of unreasonable claims handling, but that is a far cry from stopping the activity in the first place. Hence, it is our duty to share this with the public in an attempt to educate on what is really going on here.

We have attorneys throughout California to help you with similar bad faith tactics.