When Curtis Panasuk was forced to evacuate his home in Ben Lomond (Santa Cruz County) during the CZU Lightning Complex fires in August, he said he could hear “dynamite-like explosions reverberate off the walls” of the San Lorenzo Valley “as homes burned and their propane tanks exploded.”
Fortunately, Panasuk’s home was spared, but he was stunned when his State Farm insurance agent initially said the company would not pay for the additional living expenses he racked up while staying in a hotel for 10 days. The reason: Although the fire destroyed 76 homes in the Ben Lomond area, it did not damage any property within a 1-mile radius of his home.
Most insurers will pay for up to two weeks of additional living expenses, such as food and lodging, when policyholders are forced by a civil authority to evacuate their homes because of a covered peril, such as a fire.
The California Department of Insurance is unaware of any companies, other than State Farm, that say they won’t pay these expenses unless there was damage within 1 mile or some other distance from the home, said Michael Soller, a spokesperson for the California Department of Insurance. Some insurers require damage to a “neighboring premises,” but this term is “fairly broadly construed and we are not aware of any denials of claims” because of it, Soller said.
SB872, signed into law by Gov. Gavin Newsom on Sept. 29, will require insurers in California to pay additional living expenses for at least two weeks, with two-week extensions “for good cause,” when a civil authority issues an evacuation order related to a covered peril during a declared emergency. This provision, which takes effect July 1, would prohibit companies “from placing policy terms that conflict with the new law, such as a ‘neighboring premises requirement,’” Soller said. It also would expand other protections for policyholders in declared disasters.
State Farm’s 1-mile requirement is buried in an attachment to its California policy. Under “Prohibited Use,” it says it will pay for additional living expenses for up to two weeks, beginning when a civil authority issues an evacuation order, as long as there is direct physical damage to any property, other than the customer’s property, within 1 mile of the customer’s home. The damage must have been caused by a loss that would be covered under the policy.
This language has been in State Farm’s California homeowners policies for 10 years, said company spokesperson Sevag Sarkissian.
If a customer’s own home became uninhabitable because of a covered loss, State Farm says it would pay for up to 24 months of additional living expenses (or up to 36 months for good cause for losses from a state-declared emergency). This is separate from “prohibited use,” which covers mandatory evacuations. Both are subject to the same dollar limit stated under loss of use coverage.
After he complained to the insurance department, Panasuk said he spoke with a “State Farm claims expert” who said “the CZU fire coming within a mile of a house” was not required for payment of additional living expenses. However, because his expenses were less than his $5,000 deductible, no payment was made.
“State Farm advised (the insurance department) that while they do have such a 1-mile radius in their policy, they are not currently advising their agents or adjusters to deny these claims or to discourage insureds from filing these two-week additional living expenses claims,” Soller said.
Asked whether State Farm was waiving this requirement for all California fire evacuees, Sarkissian replied, “Every claim is unique and handled based on the individual merits” and that “customers with questions about their coverages or claim are encouraged to reach out to their claim handler.”
In addition to requiring reimbursement for additional living expenses incurred during a mandatory evacuation, SB872 also clarifies when insurers must pay these expenses when a home is uninhabitable.
Under current law, when a home becomes uninhabitable because of a covered loss related to a governor-declared emergency, insurers must cover additional living expenses for up to 24 months, plus an additional 12 months if there is a “good cause,” such as an unavoidable construction delay. Some insurers had been denying this coverage to wildfire victims whose homes were not damaged or destroyed, but lacked power or water.
Effective July 1, insurers must provide this coverage if the home is uninhabitable because of damage outside the property. This provision does not apply to public-safety power shutoffs to prevent wildfires.
The new law also says that if the home is a total loss, and the homeowner decides to buy or build a new home at a new location, the insurer has to pay the amount that would have been recoverable if the homeowner had rebuilt the home at the original location. In other words, it cannot deduct the value of the land, even though the homeowner would still own the land under the destroyed home.
For any claim made on or after Jan. 1 for losses related to a declared state of emergency, insurers must provide at least four months of additional living expenses in advance and give customers in the declared disaster area a 60-day grace period for paying premiums. Also, if a customer who suffered a total loss files a claim for contents, the insurer can’t require a company-specific inventory form if the customer can provide a a form that contains substantially the same information. The customer’s inventory can include groupings of categories — such as clothing, shoes and books — rather than having to separately list every individual item that was lost.