Team to Audit Handling of Fire Claims

State Insurance Commissioner John Garamendi will launch a special team to investigate complaints by hundreds of victims of the 2003 wildfires that their insurance companies are failing to provide timely payments to help replace their homes and, in some cases, wrote policies that seriously underestimated replacement costs.

Garamendi said Monday that a strike force of attorneys and consumer advocates will be operating by the end of this week, scrutinizing complaints to see if insurance companies are violating the state Fair Claims Practices Act, which is intended to guard against unfair insurance practices. If their research shows patterns of questionable practices by agents or companies, the team will order audits of company records, he said.

The team is part of an action plan, Garamendi said, in response to complaints raised at three public meetings he held last week in San Bernardino, Ramona and Scripps Ranch about insurance companies’ handling of claims after the 2003 wildfires.

A fourth meeting, at an El Cajon church campus, drew about 275 people Monday night, many of whom lost homes in Harbison Canyon, Alpine, Pine Valley and Lakeside. Garamendi urged them to file formal complaints with his department so that the new team could investigate.

He said other steps include expansion of a mediation program, created after the 1994 Northridge earthquake, to help fire victims process claims. That program will now include the issue of underinsurance, in which a policy’s monetary limits for replacing a home fall short of actual replacement costs, Garamendi.

“There is clearly underinsurance,” Garamendi said, which could be caused by several factors.

“I believe we’re going to find agents who purposely underestimated the cost of reconstruction, computer programs that mistakenly underestimated the cost of replacement, and we’re going to find computer programs that did not properly estimate the cost of inflation,” Garamendi said. A fourth factor could be that the homeowner or an agent chose inadequate insurance to reduce the cost of buying a home, he said. “Who’s at fault here? It depends on the facts.”

At Monday night’s meeting, homeowners crowded the pews at Shadow Mountain Community Church and lined up to tell Garamendi their experiences since their homes burned.

They told him they had seen a series of adjusters, had dealt with a maze of insurance company contacts and received letter after letter.

Don Halte, 64, of Crest, who lost a 2,000-square-foot home he built himself, described himself as a member of the “five-adjuster club,” meaning he had had five adjusters on his claim. The first one came from Oklahoma, he said, and: “He said things we needed to hear.” Later he received the adjuster’s figures.

“I thought maybe the gentleman from Oklahoma thought I was going to rebuild in Oklahoma,” he said. “I thought the replacement meant replacement.”

His message to the company, Halte said, was “just replace the house.”

The crowd exploded with applause.

Grant Mitchell said the estimates for replacing his home are 50% more than provided for in the policy.

“We trusted they knew what they were doing. They knew construction costs,” he said.

His wife, Pam Mitchell, described how the couple built their 3,400-square-foot cedar and redwood home in Crest over 34 years.

“My children grew up crawling over rafters and scaffolding waiting for it to be done,” she said. She said she held four weddings there. Her daughter plans to be married there next year.

“I don’t know what it’s going to look like next June, but we’re going to do it then,” she said. “I told her it might be a slab.”

Representatives from insurance companies spoke to the crowd, urging them to talk with them after the meeting.

“We do want to hear what you have to say. We are here to listen,” said Mark Toohey, assistant vice president of Farmers Insurance Co. “It hurts for us company representatives to sit back and hear the stories that you tell.”

Garamendi asked questions of every person who spoke at the meeting, such as how many adjusters had dealt with their claims. One resident said that for six months he had been asking his insurance company for a copy of the policy that he signed.

“It took three months to finally get a glossy brochure from one adjuster,” the man said. He still has not received the actual policy.