Fire victims see shortfalls in insurance
Victims of this summer’s catastrophic wildfires are struggling with insurance settlements that are too small, with burdensome requirements to itemize lost possessions and with livingexpense reimbursements that run out long before they can rebuild. That has legislators, regulators and insurers in the state working on ways to fix those concerns before the state faces another catastrophe.
”How do we incentivize best practices and create consistency so that when people get their policies, they know what they are getting,” asked State Rep. John Kefalas, D-Fort Collins, who is working on possible legislative reforms.
Discussions started more than a year ago and picked up urgency following the destruction of more than 600 homes in the Waldo Canyon and High Park fires, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.
Colorado has faced hailstorms and tornadoes but not the mass-scale devastation that struck this summer and sharply raised the volume of complaints about insurance industry practices.
“We haven’t had those kind of experiences, like hurricanes, where hundreds of homes are lost,” Walker said.
A key goal is to implement reforms that protect consumers facing big losses without driving away insurers or jacking up premiums for everyone else, the parties involved said.
One complaint wildfire victims make is that they received only a portion of their replacement payment immediately, with the remainder coming after rebuilding is complete.
It’s a standard practice in Colorado and many states, though not all. Many policy holders are surprised to discover how it works, even though it’s spelled out in policies.
“If I paid for a product, I should get what I paid for, and I’m not,” said Trish Garner, whose house was gutted by the High Park fire outside Fort Collins in June.
Garner, 48, received $181,000 from her insurance carrier, American Family Insurance, although her policy called for $231,000 in replacement coverage, she said. The remainder is being held back until the replacement home is built, which is expected to cost about $242,000, Garner said.
”It’s normal for everyone in Colorado to take this approach, with depreciated value paid upfront,” said American Family spokesman Steve Witmer.
Another problem is homeowners who bought lower-premium policies that reimburse based on depreciated market values only to realize later it’s not enough to pay for rebuilding their homes.
Even when homeowners took out policies covering replacement costs, many find that the models insurers use don’t reflect the reality on the ground, especially following a large-scale disaster.