Victims Rush to See If Losses Are Fully Covered : Insurance: Adjusters get ready as residents check whether their policies are adequate to replace homes that have soared in value in recent years.

Victims of Wednesday’s devastating fires were scrambling Thursday to determine whether their insurance coverage is adequate to replace homes that have soared in value over the past several years.

Meanwhile, insurers said they were readying teams of adjusters to fly into the hardest-hit areas of Southern California to handle claims in what has already become one of the costliest fire seasons in years.

“From what we understand from the fire department, this is probably the worst brush fire season in recent memory,” said Dick Donegan, regional underwriting manager for Allstate Insurance Co. in Glendale. “After four years of drought, it looks like this is going to be a very rough year.”

It could turn out to be rougher still for consumers who have failed to update their insurance policies, particularly in fire-prone areas of Southern California. The last fire of this magnitude destroyed 216 homes in Santa Barbara 13 years ago.

Government officials later estimated that insurance covered only about 60% of the losses that fire victims suffered in the so-called Sycamore Canyon Fire of 1977.

A lot has changed in the past decade, though. Agents said Thursday that the bulk of the fire victims they have contacted have full coverage, largely through “replacement value” clauses that have become popular in recent years.

However, these clauses vary dramatically from insurer to insurer. Some will pay the costs of all damages, regardless of how much they exceed the policy limits. Others only guarantee that personal items will not be depreciated to current market value and instead will be replaced at original cost. Some damage waivers can be rendered completely ineffective by policy limits.

Fireman’s Fund, for example, says replacement value coverage applies only when policy limits equal at least 80% of the value of the home. In other words, a $100,000 house insured for $40,000 would get no benefit from the policy. But if it were insured to $80,000, the replacement coverage would kick in, said John Kozero, a Fireman’s Fund spokesman.

Allstate’s Donegan, on the other hand, says anyone who has purchased replacement coverage with Allstate is fully covered “no matter what.”

“If you have replacement cost coverage, and your house is insured to $100,000 but it costs $300,000 to rebuild it, you are still fully covered,” Donegan said. “There is no cap.”

Transamerica Insurance Co. estimates that 72% of its customers have replacement value coverage on the structures of their homes and more than 90% took out the coverage for contents, said Richard Olsen, a company vice president.

The percentages vary at other companies, but many of the largest insurers in the state said that at least half of their policies included some inflation protection.

Those most at risk for inadequate coverage are the people covered by the California FAIR Plan, a cooperative insurance pool that provides fire insurance to high-risk houses in brush areas. FAIR, whose name stands for Fair Access to Insurance Requirements, provides coverage only up to the policy limits and will pay for lost items only at their depreciated values, regardless of their current replacement costs, said Mike Harris, a plan spokesman.

Already the plan has received 23 claims, mostly from the Glendale blaze, Harris said. But many of those policyholders have additional “wrap-around” coverages with other insurers, he noted, adding that the average local FAIR Plan customer has $275,000 in coverage.

Meanwhile, insurers were flying adjusters into fire-plagued parts of California to help assess damages. And agents said they were already writing checks to fire victims to help them cover living expenses and new clothes.

“We are sending out checks for $5,000 even without seeing the property,” said Ed Hurd, marketing manager at Manchester Insurance Agency in Santa Barbara.

Despite predictions that 1990 will be one of the worst years in recent history for fire damage, insurers said consumers are not likely to see near-term rate hikes. Fire insurance rates are determined over 10- and 20-year periods, a practice that eliminates annual gyrations for especially disastrous years, Donegan said.

Currently, homeowner policies that include fire insurance coverage cost between $75 and $200 a year for each $100,000 in coverage, depending on location and specifics of the policy, insurance agents said. And although wood-shake roofs have been cited as one of the biggest factors in determining how much fire damage a home will sustain, none of the insurers contacted Thursday said they charged more for policies on houses with wood-shake roofs. However, several insurers said they might decline a policy application if the home were in a brush area.