Many of us appreciate misdirection, deception, and technical play on words in brainteasers and riddles. The same is not usually the case when an insurer is explaining your legal rights following a devastating loss. While this blog showcases California claims, laws, and regulations, the principle for policyholders and policyholder advocates applies across the country – it pays to know your insurance claim rights.

During a total loss claim following a 2020 California wildfire deemed a “state of emergency,” an insured received a short claim update with language that, while technically true, could easily mislead an unsuspecting policyholder. The first example, below, relates to time to collect withheld or depreciated amounts for personal property:

The policy states: If you receive a settlement under this policy for damaged personal property on an actual cash value basis, you may make an additional claim for payment provided:

i. Repair or replacement is completed within one year of the first payment for damage to your personal property. In the event you are unable to complete the repair or replacement of your damaged personal property within one year after such first payment because of conditions beyond your control, you may request an extension of time in which to do so. Additional extensions of six months shall be provided to you for good cause.

The keywords here are “the policy states.” While the policy did state this, what the adjuster failed to mention in the letter was that legislation passed nearly two years prior, A.B. 1772, extended the minimum time permitted to recover withheld monies. The applicable section of California Insurance Code § 2051.5 reads as follows:

(b)(1)(B) In the event of a loss relating to a ‘state of emergency,’ as defined in Section 8558 of the Government Code, a time limit of less than 36 months from the date that the first payment toward the actual cash value is made shall not be placed upon the insured in order to collect the full replacement cost of the loss, subject to the policy limit.

Following a total loss from a catastrophic event, policyholders often remain displaced from a permanent residence one year after the first payment toward their personal property is made. It is not hard to imagine skewed spending habits and policyholders foregoing their withheld dollar amounts after reading the language quoted in the letter above.

Although the above-quoted letter is short—a mere few pages—the adjuster manages to include a second potentially misleading paragraph. This section relates to the “suit against us” provision:

The California Fair Claims Practices Regulations state that you must be notified of all time limits that may apply to your claim. Your policy contains the following provision concerning suits against California Fair Plan:

12. Suit Against Us. No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss.

This time, the lead-in language is “your policy contains the following provision.” However, the letter does not include language from A.B. 2594, which extended a consumer’s right to sue from 12 to 24 months if related to a state of emergency. The applicable language in Cal. Ins. Code § 2071 reads:1

No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss. If the loss is related to a state of emergency, as defined in subdivision (b) of Section 8558 of the Government Code, the time limit to bring suit is extended to 24 months after inception of the loss.

While the first sentence of California Code of Regulations § 2695.4(a) states, “[e]very 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[],” your adjuster may not be current with recently passed laws or regulations that could impact your claim. Further, be mindful that the language in your policy may not meet the minimum coverage protections required. We recommend becoming familiar with the legal claim rights in your state, or consulting with someone who is.

For more blogs related to wildfires, including legislation updates and claim handling tips, check out some of Merlin Law Group’s previous blogs here. United Policyholders is also a premium resource for free insurance information and education. Check out their Disaster Recovery Help Libraries and Claim Guidance Publications.
1 Notwithstanding tolling.