Episode 33. LA Wildfires: When to File a Claim

The LA wildfires have caused an estimated $20-30 billion in losses so far. We know homeowners are reeling, and wanted to provide some more advice on what to do if your home was lost or damaged in the fires.

This week, Bob focuses on when you should file a claim, emphasizing that earlier is better than later. Notify your insurance company and agent in writing as soon as you can that you’ve experienced losses due to the fires and are making a claim, even if it's just through a simple email.

Mutual Aid LA has assembled an interactive resource library for those who have been affected by the wildfires. You can find it at https://mutualaidla.org/ .

Have a topic you'd like Bob to cover? Submit it to questions@gpsllp.com, or connect with Bob directly on LinkedIn.

And if you'd like to know more about GPSL, check out our website.

You can also find us on LinkedIn, X, and Facebook.

Transcript

Well, I don't know what this bug is that's been going around It doesn't really feel

bad, but it has affected my voice. In fact last week I couldn't talk at all.

So I appreciate Spencer stepping up and recording coverage council is in and Well,

my voice is a little rough this week I feel like I'm on the mend and I hope

you'll excuse the rough intonation and sound.

This week we're going to continue our series on the LA Fires and that claims under

homeowners policies. At the time that I'm recording this, the fires in Los Angeles

have been burning for two weeks. They started on January 7th,

2025. And today is January 21,

2025. Also, new fires have popped up in San Diego County and most of Southern

California remains under red flag warnings for increased fire risk because of

extremely strong winds and an excessively dry climate.

At this point, at least 27 people have died because of the fires,

and more than 15 ,000 structures have been destroyed.

I looked at Moody's, and as of January 20th, 2025, Moody's estimates that insured

losses will likely range between $20 billion and $30 billion.

This estimate includes losses from property damage, including evacuation and smoke

damage, business interruption, and additional living expenses across residential,

commercial, and industrial lines. Now, while Moody's estimates are generally considered

accurate. Many factors contribute to uncertainty about the ultimate cost.

For example, complying with ordinances and laws and rebuilding requirements such as

local building codes that mandate seismic upgrades or modifications increase the

ultimate cost of the fires. Also, there are costs associated with debris removal,

and debris removal can take months to accomplish. Then there are the issues of

coverage and extra expenses from high -value assets, such as automobiles,

fine art collectibles, and other valuable contents from properties in affluent

neighborhoods. And we know from news reports that the Palisades is definitely an

affluent neighborhood, and I'm sure had a lot of collectibles and high value assets

that were damaged.

Also at this juncture, more than 100 ,000 people have been displaced.

Many of those people will look to homeowners insurance to help them rebuild and

recover. And so the demand for labor and materials will escalate the costs,

especially if rebuilding is accelerated, and it likely will be.

Los Angeles is set to host major global sports events in the next few years,

including eight matches in June 2026 for the FIFA World Cup.

So this may divert resources to rebuilding infrastructure to support these events

rather than expediting home reconstruction.

In the last episode of Coverage Council is in, We provided five tips for homeowners

seeking insurance coverage for their property losses. In this episode,

we focus on when to make a claim. Virtually every insurance policy contains a

requirement that the insured must give the insurer prompt notice of a loss.

Many homeowners worry that they don't have enough information and should wait to give

notice. But there is no reason to wait. There would be plenty of time during the

claim adjustment process to inventory and value the loss. The insurer has people who

investigate and validate claims. There would be plenty of discussion. The key here is

to give notice as soon as you can. Sometimes, when people delay notifying the

insurer of a loss, the insurer can claim it was prejudice by the late notice and

refuse to provide coverage. One version of the standard homeowners policy sold in

California states the insurer has "no duty to provide coverage under this policy if

the failure to comply with the following duties, which includes prompt notice, is

prejudicial," end quote, to the insurer. This is known as the notice prejudice rule.

There are contours to the notice prejudice rule that address the kind of circumstance

that qualifies as this, and the magnitude of the circumstance that will allow the

insurer to use that prejudice to deny coverage.

Coverage attorneys sometimes become creative in advocating for an insurer who chooses

to rely on the notice prejudice rule, either to deny coverage or to use it as a

fear factor or type bargaining chip in negotiations with the insured over the amount

of coverage that will be provided. But rather than discussing those contours here,

we want to make this point.

Notify your insurance company as soon as you can. It's better to avoid the late

notice defense than to win an argument about it. The argument will be time -consuming

and expensive to deal with and have an uncertain outcome. It's better to avoid it

than to fight about it. So again, here's the point. Notify your insurance company as

soon as you can.

Your notice can be as simple as saying something like, "Our house and its contents

were destroyed by fire on January 6, 2025. We are making a claim for coverage under

our homeowner's policy. That's all you need to say. Be accurate on your date if you

can,

but just say our house and its contents were destroyed or damaged and we're making

a claim. Give that notice in writing to your insurance company and copy your

insurance agent. Most of this can be done by email, and you just need to save the

email.

Your insurer should acknowledge your claim immediately, but in no event more than 15

days after they receive it.

There may be a practical problem here if you were displaced and you can't get mail.

If you're in that situation, tell the insurer the best way to contact you. That

will probably be by email. So tell the insurer to respond to you at a particular

email address. And then watch for those responses within 15 days of you submitting

the claim.

Claim acknowledgement is almost an automated process for insurers.

They have

systems in place for responding upon receipt of a claim and usually those are

automated. They're a standard form letter and they'll get those out to you. They'll

usually tell you that they are going to assign an adjuster, or that an adjuster has

been assigned and how you should contact them.

Investigation and evaluation of your claim take longer.

However, under California regulations, the insurers are supposed to respond to

substantive communications from the insured within 15 days.

That doesn't mean they have to resolve your claim within 15 days. They just have to

tell you where they are in the adjustment process and almost always the communication

will say something about needing more information.

Then there is payment once the amount of the loss is determined You're probably not

going to agree there are going to be issues of How much it's going to really cost

to rebuild? They're going to be issues about the extent of coverage for rebuilding,

do you have full replacement cost, only partial replacement cost, how is that valued,

and are you giving up the right to make a supplemental claim by accepting the

amount offered by the insurer? We'll address these issues in a later episode of

coverage council is in. We raise them in this episode simply because it helps us

frame the next issue we want to talk about in terms of timing because delays in

claim resolution can create a trap for the unwary in preserving their legal rights.

Lawyers think of the deadline for contesting insurer claims decisions in terms of the

statute of limitations. The applicable statute of limitations depends on the legal

theory of recovery and does not always start running upon the same event.

For example, if the legal theory is breach of written contract, which is common in

insurer and insured disputes, the statute of limitations in California is four years

from the breach, but now you have to decide what constitutes the breach.

Even if you have a pretty clear breach in your mind, don't think you have four

years to file suit.

Your insurance policy probably shortens the statute of limitations. This is called the

contractual suit limitation clause, and they are enforceable in California.

A typical suit limitation provision in a homeowner's policy in California starts out

with a heading, usually something like suit against us,

and then says and I'm going to quote here from a sample policy no action can be

brought against us unless there has been full compliance with all of the terms under

section one of this policy and the action is started within two years after the

date of loss right there the action is started within two years after the date of

loss, that's the contractual suit limitation provision. If your policy has this

language, then you have two years, not four, to initiate a suit if you disagree

with your insurer's claims decision. The legal theory of recovery does not matter,

the triggering of the statute of limitations does not matter, and even if the law

gives you a longer statute of limitations or the applicable statute of limitations

starts at a later date than the date of loss, this provision is going to apply and

limit you to, in this example, two years after the date of loss.

So, if your house was damaged by fire on January 7,

2021.

Your two -year suit limitation period is January 7,

2023.

And I screwed that up. I was thinking of 21 because today is the 21st.

It would be

7 /20 /25 with the suit limitations period of January 7 /20 /27.

And that comes faster than you think.

Now every California law requires your insurer to notify you of your deadline to

file suit. But often the notification does not give you a date certain.

Many times the insurer will not calculate your deadline, but they'll simply tell you

the deadline is two years after the date of loss and leave it to you to figure

out what that deadline is. And there are multiple complicating factors.

For example, what if the two -year anniversary falls on a court holiday.

Which way do you go? You don't get more time. You have to file sooner than that.

What if you have multiple dates of loss?

You need to compensate for those.

So, while it can be Legally challenging to figure out what the appropriate deadline

is.

The thing you need to know is missing your deadline is lights out for your claim.

There is no reason to even come close to missing the deadline though.

The wise policy holder will look at the suit limitation provision of the policy.

Some of them are as short as one year. I quoted you one that was two years, but

some are less. And then the policy holder will ensure that they have either resolved

the claim, preserved their rights by getting an extension of the suit limitation

provision, or instituted suit, and done these things well in advance of the deadline.

That is true. There are several theories that have developed to protect policyholders

who miss their deadlines.

But why rely on an exception to the rule that may not apply to you when it is

within your ability to meet the deadline and meeting the deadline is easy.

So this is something where you shouldn't even be getting close to the cliff. You

shouldn't be getting close to the deadline. Calendar it and give yourself plenty of

time to meet it. So here are the takeaways from this episode of Coverage Counsel is

in. Number one, notify your insurer and agent in writing that you have sustained a

fire loss and are making a claim under your insurance policy. If you are displaced

such that you can't receive mail, tell the insurer and the agent the best way to

contact you. Number two, review your policy for the contractual suit limitation

language and then put in your calendar a three -month tickler before your filing

deadline to either resolve the claim or agree to an extension of the deadline.

And if you find that you're getting to that three -month period, you don't want to

think that a lawyer can fix us for you because lawyers will be busy on these

claims and they may not be able to take them if you wait till three months before

or much closer. I've had people come in to me a day before their deadline and I

say no. I'm not going to take on the liability of filing a suit in less than 24

hours when I have obligations to investigate it and understand. You have to give

your lawyer, your adjuster, your advocate enough time to understand your claim and do

it well in advance of the contractual suit limitation deadline. So that's it for

this episode of Coverage Counsel is In.

The heart goes out and we're looking to provide assistance in whatever way we can

to the victims of the LA and Southern California fires. And beyond holding good

thoughts for them, we are donating and making other contributions for relief agencies.

And we invite our listeners to join in whatever way they can to support and assist

the victims o