Insurers Under Intense Pressure to Resolve New Fire Claims : Coverage: One survey says 48% of homeowner cases remain unsettled in Oakland. Watchdog groups say companies will have to do better in Laguna, other areas.

Smoke was still in the air when the first insurance workers arrived to help customers burned out of their homes by last month’s Laguna Beach fire.

Within days, meetings were being held to explain to policyholders how the claims process works and to hand out insurance checks to cover living expenses.

The quick response from insurance representatives was meant to put customers at ease, said Jeanine Raquet, regional underwriting manager for Allstate Insurance Co. “We are there for them.”

Clearly, the insurance companies, which so far have received more than $435 million in claims from the Laguna blaze, are under intense pressure to show they can do a fair and competent job.

Their treatment of victims of the latest Southern California firestorms will be closely scrutinized by government authorities and consumer advocates who were appalled by the flood of complaints from policyholders after the Oakland hills fire two years ago that destroyed more than 3,000 homes.

Allegations of marketing misrepresentations and abuses associated with claims handling in Oakland prompted the California Department of Insurance to levy a $1-million penalty--the largest in state history--on Allstate.

And results of a recent random survey by the consumer group Policyholders United, which show that 48% of homeowner claims still remain unsettled in Oakland, has given the entire insurance industry a public relations black eye. In contrast, the major insurance companies involved reported to the state that all but about 4% of the claims had been settled.

The Oakland Hills fiasco spurred Sen. Art Torres (D-Los Angeles), chairman of the state Senate Insurance Committee, to hold an investigational hearing last month and to promise corrective legislation.

Already, legislation sponsored by state Sen. Nicholas C. Petris (D-Oakland) has been enacted that requires insurance companies to provide more thorough explanation of available homeowner coverage when policies are purchased or renewed.

Meanwhile, Torres, State Insurance Commissioner John Garamendi and United Policyholders have vowed to monitor the Southern California situation closely to determine whether the insurance companies have reformed.

“We believe there ought to be a higher sense of responsibility to policyholders as a direct result of the Oakland fire, and we anticipate there will be. But in all honesty, with insurance companies you never know what to expect,” said Elena Stern, press secretary to Garamendi.

Stern said Garamendi has met personally with the chief executives of most of the insurance companies involved in the Southern California fires “to give his demands on how they will respond.”

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While Laguna Beach fire victims so far seem satisfied with the response of their insurance companies, those familiar with the Oakland Hills situation say it is still much “too early to tell” how the companies ultimately will perform.

“After the fires, no one was really worried about insurance. Pretty much everyone felt they were fully covered,” said Lisa Ramer, administrative assistant to Petris.

“But later they found out their policies were lacking,” she said, often as a result of low-balling by insurance agents who had routinely underestimated the actual cost of home replacement in the competition to sell policies with lower premiums.

But there are indications that the insurance companies learned at least a few lessons in Oakland that will benefit owners of the more than 366 homes destroyed in Laguna Beach, Emerald Bay and El Morro Trailer Park. Already some of the burned area’s leading insurance carriers, including Farmers Insurance Group and State Farm Insurance Group, have said that in some instances in which policyholders are underinsured for their home contents, coverage will be raised above the policy limits--one of the many concessions that insurance companies ultimately made in Oakland.

Also, State Farm and Farmers, after learning in Oakland about the delays in rebuilding homes after a large catastrophe, have agreed to extend the time limit for reimbursing families for additional living expenses from one year to two.

Some insurers are also tackling the problem that even the most deluxe homeowners policies often lack coverage to meet upgraded modern building codes for hillside construction. This became a major issue in the Oakland catastrophe, which produced about $1.7 billion in claims.

Jeff Beyer, Farmers’ vice resident of public relations, said his company plans to soon file an application with the state to add coverage for code upgrades to all of its homeowner property policies.

Beyer said Farmers’ customers who lost their houses in the hills of Laguna Beach will be “dealt with individually” on the code issue. In some cases where code upgrade coverage was not purchased, he said, “we will provide an opportunity for them to retroactively purchase it” at the original, pre-fire cost.

Robert Blodgett, a State Farm spokesman, said the company has just received state approval to add 10% to the face value of its premiums toward the cost of rebuilding homes to comply with new codes. The added coverage is being provided at no additional premium cost, according to the state Department of Insurance.

Moreover, he said, the extra coverage will apply to fire victim customers in Laguna Beach as well as those in Pasadena, Altadena, Malibu, Calabasas and Riverside.

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Fortuitously, all the fires broke out after Oct. 26, the date that the company filed with the state Department of Insurance to amend its policies. Therefore the upgraded coverage became effective for fire victims.

Raquet said Allstate, however, will not make concessions on code upgrades. “If somebody’s contract does not have building code upgrade coverage, we would stand by the contract,” she said.

But Raquet said Allstate also “learned a lot from Oakland,” particularly about the importance of assigning claims adjusters on a permanent basis to fire victims.

When adjusters were rotated in Oakland, she said, it irritated the fire victims who felt that each time they received a new adjuster that they “were starting all over again.”

Raquet also said Allstate representatives rushed to Laguna Beach to seek out policyholders, while in Oakland they waited for victims to file claims. “We are trying to be out there and proactive and just make the process as easy as possible for our customers,” she said.

Patty Lombard, executive director of the Western Insurance Information Service, an insurance trade association, said group meetings that insurers are holding with their customers in Laguna Beach stem from industry recognition that in Oakland the claims process was not explained well to policyholders.

“They thought the insurance adjuster would come and give them a check and life would be perfect,” she said.

For the first time, she said, insurance industry representatives were available in Laguna Beach to answer questions at federal disaster assistance application centers. Also, she said, the Western Insurance Information Service plans to send a representative to all community meetings of fire victims.

Sen. Torres said he is impressed by the improvements he has seen in the industry’s response in Southern California. “Their record is better so far,” he said. “They showed up faster and are more aware of the issues they need to confront, such as code upgrades, and that is all healthy.”

But outreach efforts by insurance companies are greeted with skepticism by Ina De Long, founder and president of Policyholders United, which says it represents several hundred California insurance consumers.

“I think it is public relations to say we are here for you and you don’t need outside help,” said De Long, a former disaster supervisor for State Farm.

United Policyholders is striving to link Oakland fire victims with those in Laguna Beach who could benefit from their consumer perspective on insurance issues.

It is important for people insured by the same companies, De Long said, to meet and compare notes to ensure that they all receive the best treatment.

She said she hopes that Laguna Beach fire victims will fare better than their counterparts in Oakland. “It is too early to tell,” she said, “but the industry needs to be aware that everybody is looking over their shoulder, and I am the first one there on my tippy-toes.”