MAUREEN CAVANAUGH: This is KPBS Midday Edition, I am Maureen Cavanaugh. The structural damage from last week's fires was kept to a minimum by the heroic efforts of firefighters in San Diego. But even so, more than sixty structures were lost. The state insurance commissions has pointed to San Diego's wildfires is a wake-up call for homeowners across the state to make sure they have enough and the right kind of insurance. Unfortunately, San Diegans who lost homes in previous wildfires can know all too well how a home they thought was completely covered was not. I would like to welcome my guests, Nancy Kincaid, press secretary for the California Department of Insurance, welcome. And professor Kenneth Klein joins us from the Cal Western school of Law. Welcome to the program. Nancy, have you been able to see any of the fire damage to structures here in San Diego? I know you are in town. NANCY KINCAID: I have, and I just came from an outreach effort with our enforcement team in the Carlsbad area, we also working in San Marcos today too. MAUREEN CAVANAUGH: What actions does the state insurance commission take when there is a major wildfire? NANCY KINCAID: It is not actually the commission, it is the Commissioner. He is an elected official, and what he does is have an enforcement team that we rollout right after the fires, with what we call a DART team, and we work with those neighborhoods talking to homeowners. Because unfortunately unscrupulous vendors, contractors and public adjusters will start working those neighborhoods right after the fires. They are approaching homeowners at a vulnerable time and we are trying to make sure that those who are trying to find work are licensed and above board and have no enforcement actions against them, and also trying to make sure that homeowners are well-informed about the steps they need to take to recover from fire damage. MAUREEN CAVANAUGH: That is a question I have for you, as I saw a number of press releases from your office, FBI and local law enforcement about the attentional for fraud and fraudulent recovery efforts, contractors and so forth. Is that always a big problem after fires? NANCY KINCAID: It is actually a very big problem and we have seen in these neighborhood some people trying to get business right after the fire, sometimes the fire is not even out when they start working in neighborhood. They are specific regulations that prohibit a public adjuster from approaching a home before seven days. They need time to work through some of the drama, catch their breath and decide how to move forward. Contact insurance companies, begin that recovery process and find out from officials like the state license board, Red Cross and FEMA, what resources are available to them and what the requirements are for people trying to get business so that homeowners are not taken advantage of. You see it happen a lot. MAUREEN CAVANAUGH: Most people who own a home have insurance and they pay insurance premiums, and they contact insurance agents if something goes wrong in the house. But there are a lot of things about fire coverage that people are not aware of. For instance, I was surprised to learn that people who are under mandatory evacuation orders may be able to get there homeowners insurance to pay for a hotel room or other living expenses, is that right? NANCY KINCAID: That is right. It is called additional living expense, and it is under your homeowners policy. It gives the homeowner an opportunity to collect under the policy additional expenses that are needed when they are trying to recover or even deal with the fire. That includes a hotel room, food when they are away from home, even food that may have gone bad in freezers or refrigerators when the home was damaged, additional living expenses that many homeowners do not know that are available to them. MAUREEN CAVANAUGH: Your office last week issued wildfire preparation tips for homeowners and that was in the context of these fires down here in San Diego and also about a potentially very bad fire season. How bad of the fire season are you expecting? NANCY KINCAID: We are working with CalFire in a partnership to help educate homeowners your we are sitting on the third year of record drought, conditions are ripe for devastating fires. Our crews have already responded to 1500 fires. This time last year, they had responded to 800. We are pacing well ahead, and last year's fire season was a difficult fire season as well. Getting in front of this as much as possible and helping homeowners understand what they need to do is critical and one of the most important things that we see homeowners not doing that they need to do is home inventory. Try to remember everything you own. What is in your closet, electronics, it is extremely difficult on a good day. But trying to remember after a fire is extremely difficult. What most people don't think about, it is not that hard. You have a smart phone in your hand every day. Use that phone, videotape or photograph things in your home, your closet and electronics, things that are important to you, improvements you have made in your home and a good idea is to store those things in a cloud. That way you can pull them down if something would happen to your phone at any time and have them available for your insurance company or disaster official that needs that information. MAUREEN CAVANAUGH: Professor Kenneth Klein, your house was one of 300 homes that burned in Scripps Ranch in the Cedar fire back in 2003. You recently wrote an article about that experience and most specifically about what many of your neighbors found out after that fire, when homes were destroyed and they tried to rebuild and they found out they were underinsured. Can you tell us basically what does that mean, underinsured? KENNETH KLEIN: Underinsured simply means that the amount of money it will take to rebuild your home, to put you in the position that you were in is more than the amount of insurance coverage you have. You just don't have as much money as you need from insurance to cover the loss. MAUREEN CAVANAUGH: Does that mean they had to take out new mortgages to pay to rebuild homes? KENNETH KLEIN: They had to either take out new mortgages, find other debt, dig into savings, or to build less and hope that mortgage companies will accept the new house as sufficient collateral for the loan. MAUREEN CAVANAUGH: You decided to dig into the question and find out how under insurance happens, what did you find out? KENNETH KLEIN: Is basically a combination of three things. The first is that the way that insurance is right when you buy in the first instance, it almost inevitably prices low. The second is that the money to be made from insurance companies in residential insurance is in renewals. Only 5% of the market turns over every year. And so, in renewing, and insurance agent does not want to quote a higher price because the buyer will say maybe I can get this cheaper. So they will hold the coverage line and that makes it worse over time. The third is when you have a mass loss like a wildfire, now you have scarcity, so your low to start, it got worse over time, and the way that you lost the home, the prices gone up. MAUREEN CAVANAUGH: Just to be clear, when you're renewing a policy and the premium does not go up, it is supposed to make people homeowner feel good. But at the same time it is worth a question or two to find out whether the value of your home has increased, and whether or not there is full coverage on the property. KENNETH KLEIN: Right, in the last few years we went through a period where prices of or values of homes were declining. That is actually unusual, on average and year on year overlong reaches of time, homes actually appreciate. If your home is going up in value, the replacement value is going up and your insurance is holding the line, you are just getting more and more upside down against your insurance. MAUREEN CAVANAUGH: And Nancy, a question about how big a problem is this? I have heard about under insurance and all of the major wildfires that have had structure and property damage in San Diego. Is this a problem across the state? NANCY KINCAID: It is a significant problem, but it is difficult to measure, because we do not know until after an event that we have this problem and we can count it. The professor makes a good point that people typically, whether it is because the agent has not urged them to review insurance or because the homeowners trying to keep their cost down, they are not insuring for the proper amount. You were using the term value of a home, which is a misnomer for homeowners. You need to understand that your insurance is not based on the you of your home, it should be based on the cost to rebuild your home. It is the responsibility of homeowners to make sure that they understand what it would take to rebuild a home. That is the level you need to be insured. The other thing to keep in mind that the professor also pointed out, scarcity with the issue when it comes to resources after a higher. Prices for demand surge will make prices go up, harder to find contractors, prices go up for demand. It is very important for homeowners to understand what that cost could be to rebuild the home. That is the level of insurance that you need, not the value. MAUREEN CAVANAUGH: Don't some insurance policies contain language that they are for replacement value? NANCY KINCAID: I am not aware of an insurance company that still does that. I think the fires that we saw in Scripps Ranch, and other major wildfires have changed the way that insurance put that language in a contract. It is very important to read your policy and always go to exclusions and limits, don't just look at what is covered, look at what is excluded and the limits of your policies, the different things covered under the policy. Never assume you have replacement value. KENNETH KLEIN: I would say two things, there is one insurer that still does that, GRC. But on the whole, you cannot get it. MAUREEN CAVANAUGH: Insuring yourself for replacement value for your home? KENNETH KLEIN: Absolutely. And you will see in policies language for replacement value or even full replacement value, but it is still replacement up to the limit of the policy. It is still capped. The second problem with that, the policy inevitably, and by the way you do not get the policy until after you pay the premium. But the policy will typically have buried within it a clause that says that if the amount of insurance that you have is low, that is you on the homeowner, not the insurer. The only way I know to protect yourself as a homeowner is to say to your insurer, in writing, I want to have enough coverage so that I have enough money to rebuild my home in full if it is a total loss. And you write risk, I don't. You tell me that number and I will rely on it, get the number in writing and keep both of those writings somewhere other than in your house. MAUREEN CAVANAUGH: Right, you need it somewhere other than your home if your home is damaged. Nancy, is this conversation a bit moot for people here in San Diego County right now? Is there a moratorium on buying fire insurance after a major fire incident? NANCY KINCAID: They're certainly can be, but it is important for homeowners if they have any question on coverage or concern about a company or need assistance for a claim, they should call our department at 800-927-4357. Our customer services division has a lot of experience in dealing with these fire events and assisting consumers in navigating the claim process. It is critical that they do that. We'll also help you in your quest to find insurance. Some of these areas, companies are limiting underwriting and that makes it more difficult and expensive to find insurance if you are in a wildfire area. I encourage you to call our consumer services division and shop around to help find you insurance that is affordable. MAUREEN CAVANAUGH: Daniel is calling from Claremont, he wants to know about renters insurance. Welcome to the program. NEW SPEAKER: I want to know what kind of coverage do we need as renters, and how we will be covered. I also want to know, for a lot of us our largest asset is our vehicle. I notice a lot of cars have been lost in the last fire and probably in this fire to. What are we doing to help people get cars out of the fire zone prior to the fire coming through and what should we do about that, maybe we can reduce insurance on our cars as they get older and put it towards apartment insurance so we can get coverage that way. NANCY KINCAID: Renters insurance is often quite affordable, some people don't even think of it. Your landlord is not responsible for your content in the event of something like these wildfires. It might be a different story if the landlord was negligent in some way. It could be settled in a court action. It is important to consider renters insurance. An agent can help you shop for that. We can do the same thing on our website, it is important for you to understand the value of the things that you own or what it would cost to replace those, and that is the level of insurance you want to buy. When it comes to auto, since 9/11 there have been pretty dramatic changes in things like auto policies in terms of what is covered. It is very important to look at exclusions and make sure that your auto policy will cover you. Or as the professor suggests, get in writing if it is not clear to you from your agent if there was a wildfire and your car is damaged or destroyed is it covered. As far as the question about getting out of the fire area and saving a car, you have to respond to what the fire department tells you to do. If they limit cars coming in and out you may not have the option if you have two cars to get out of the area. Evacuation orders are in the control of law enforcement and first responders. You absolutely have to respond to what they are requesting. Always know your coverage and make sure you have appropriate coverage. MAUREEN CAVANAUGH: That me ask you again, isn't it true that a lot of insurance companies if not most will have an moratorium about selling or increasing insurance policies right after a major fire? NANCY KINCAID: Some companies do and is very important for consumers to find out what their companies are doing or if they are shopping for insurance and need help with that, to reach out to our department and get assistance. MAUREEN CAVANAUGH: Ken, how long did it take for you to rebuild from the Cedar fire? KENNETH KLEIN: There over 2400 homes laws, we rebuilt thirteen months after from start to finish, we were the twelfth home rebuilt after the fire. MAUREEN CAVANAUGH: And as you say in the article, you were lucky enough to have enough insurance on your property. KENNETH KLEIN: We were lucky enough to have that. All of the data I have seen, it is very hard to come by, at least 80% of people are underinsured by at least 20%. MAUREEN CAVANAUGH: In addition to what you just recommended, people actually having something in writing, is it also a good thing for people to review insurance policies, and I will use the word that Nancy doesn't like, the value of the kind of amount of insurance that you have on your property on a yearly basis? KENNETH KLEIN: It is a good thing to do. Anyone who says they have read their insurance policy from cover to cover and they understand it is lying to you and less they work in the insurance industry. The entirety of reading your policy is based on the assumption that a normal human being could read and understand it. That frankly is an illusion. Yes, we should all have some sense of what insurance we have. MAUREEN CAVANAUGH: I have to end it there. I would like to thank you both so much.
San Diego County Planning and Development Services officials are working to reach people whose homes were destroyed or badly damaged in the recent wildfires.
"But in some cases, the telephone numbers we can find for these folks are landlines, which, unfortunately, were destroyed as well," said Gig Conaughton, County spokesperson.
The County opened a Recovery Liaison Office at the County Library’s San Marcos branch, located at 2 Civic Center Dr., San Marcos, CA 92069. The office will be open from 7 a.m. to 5 p.m. every day.
The office is offering help to people with damaged or destroyed homes on how to obtain building permits, clear ash from swimming pools, safely handle food after a power outage and other recovery and rebuilding information.
A behavioral health specialist will also be available.
On Tuesday, the county Board of Supervisors will consider a resolution to waive building fees in unincorporated areas or other neighborhoods where county approval is required. The supervisors will also be asked to approve a system for residents to replace documents like birth certificates and marriage licenses.
The county Assessor/Recorder Clerk's Office has already offered to reassess damaged properties and keep the lowered values in place until rebuilding is completed.
A Cal Western School of Law professor said that losing your house to a wildfire or other type of disaster is a "disorienting" experience for homeowners, who need to be prepared for a large number of concerns over the next several months. Ken Klein, who lost his Scripps Ranch residence in the 2003 Cedar Fire, said he became an "involuntary expert" on the subject and now teaches a
seminar on natural disaster law and policy. He said it was amazing to discover how grounded his life was in his house, and losing the home was "disorienting."
"You think you're making good decisions but you're not," Klein said. He suggested keeping a written journal of who you talk to, what they say, and what you do.
About a dozen houses were destroyed or significantly damaged in two of the 11 fires that raced through San Diego County this week, along with two apartment complexes and two commercial buildings. The cities of Carlsbad and San Marcos were in the midst of conducting damage assessments, which could change the tally.
The major issue is making sure homeowner's insurance policies are enough to pay for rebuilding, Klein said. Nationwide, 80 percent of homeowners are underinsured by 20 percent, he said. The value of a residence that's written into a homeowner's policy is the owner's responsibility, not the insurance company's, according to Klein.
A homeowner should email his agent or broker stating that he or she is relying on them to write the policy with a value high enough to rebuild, and then get a written response, Klein said. He said the documents should be stored in a safe place other than their house.
Verbally discussing the value of the policy is not good enough, he said.
After he lost his house, he said he ran into a large number of issues that people might not ordinarily think about.
Among them:
•the leftover debris is toxic because of chemicals used to manufacture various products, and disposing of them will raise environmental concerns and require the payment of fees;
•evacuees who left on short notice might not have enough clothes or other necessary personal items; owners will have to work out with banks how to pay the mortgage; insurance reimbursements might have to be distributed through the housing lender, which might have a different schedule than the rebuilding contractor;
•listing inventory becomes extremely difficult when you can no longer see the items that were destroyed, and replacement values are impacted by depreciation;
•rebuilding on a different floor plan will mean using a new foundation slab, which could be opposed by the insurance company or local government; and
•homeowner's associations will have authority over the design of a rebuilt home, which could cause a conflict if the owner is underinsured.
Klein said that in the Cedar Fire, his house was destroyed when a nearby house exploded, throwing flaming debris through his roof. The landscaping survived but he had to figure out how to water it when he had no access to utilities, he said.
His house was the 12th to be rebuilt, which was "considered ripping fast," he said.
"My experience was fine," Klein said. "In fact, in my list of hassles, this was not high on the list. It is very specific to the insurance
company, the adjuster and what your policy says."
He said he moved into his rebuilt home 13 months after the fire. Now, 11 years after the horrific blaze, some lots where houses once stood remain empty, he said.
Visit sdcountyrecovery.com for more information.
California Department of Insurance Hotline 1800-927-HELP
UPHelp.org
