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In this state of emergency, we wanted to give a quick access point to resources for our clients and business partners.
For victims of the recent wildfires, we have put together some helpful tips and advice on what to do next and how to deal with the devastation.
Below we have gathered some immediate questions and answers on fire losses and insurance coverage:
The State Bar of California is warning the public to watch out for and report potential fraud in response to the recent fires across the state. As a result of California’s ongoing fires, many people may wish to seek legal advice for various reasons, including insurance disputes, seeking Federal Emergency Management Agency (FEMA) assistance, employment issues, landlord tenant disputes, consumer fraud, and more.
Other than insuring the immediate needs and safety of the owners, contact your agent to report the claim and thereafter promptly fill out and return the "proof of loss" claim form. Contact information for the name of the insurer, the type of insurance, the limits and the deductible was probably included in the Association's annual budget report (Civil Code section 5300(b)(9).
Generally, the Association's Property Insurance policy protects buildings owned or maintained by the Association (i.e. condominiums and attached "townhomes") but rarely covers detached single family homes.
The limits are as set forth in the declarations page of the policy and in the annual disclosure noted above. Whether the limits will be adequate depends on the extent of the damage and the type of coverage and whether the Board purchased a policy with a high enough limit. For older buildings, the biggest question will be whether the insurance covers upgrades required by building codes adopted after original construction. An Association may, or may not have coverage for cleanup, demolition and removal of debris.
Fire coverage usually extends to rebuilding or repairing the structure and related costs, to the limits of the coverage. Coverage may also exist for damage to visible and hidden components even where the entire structure is not a loss. Examples include damage to exterior siding, gutters, fencing, walkways, mechanical systems and insulation.
Where the limits are inadequate, it is then up to the Board of Directors to levy assessments on the owners to cover any insurance shortfall. Depending on several factors, including the wording of the CC&Rs and the nature of the repair needs, a special assessment required for rebuilding may not require membership approval.
If the project is a condominium or attached planned development it will likely cover rebuilding the structure, but interior damages may require individual owner's policies.
Like so many other things about insurance, it depends on the language of the policy. Insurance premiums are influenced by the size of a deductible or what is known as "self-insurance." Higher deductibles result in lower premiums, but also require more cash out of pocket when a loss occurs. A high deductible may require that the Association assess the owners to raise the cash to meet the deductible so that the carrier will then pay for the remaining loss.
Usually yes. Where the damaged component is something for which reserves have been collected (roofs, painting, and balconies) then reserves can be used without "repayment". Otherwise, reserves must be repaid within a year or extended periods based on prudent reasons. In some Associations the deductible is borne by the Owner and the Association might be able to advance that amount on the Owner's behalf.
No, FEMA generally deals directly with individual owners and not businesses or corporations.
The U.S. Small Business Administration (SBA) is a possible source low interest rate federal funding for fire related repairs. Disaster loan information can be obtained at (800) 659-2955 or online at:
Here are practical steps directors and management might take--steps which will be more or less relevant depending on the damage sustained (some, none or a great deal).
Berding|Weil can assist Associations in navigating the application process for submitting a claim with an insurance carrier, or resolving coverage disputes. We can also help to prepare construction contracts, obtaining loans for reconstruction, or disputes with contractors.
At a time of massive losses as we have just seen, just like looters, bad actors can prey on unsuspecting Owners and Associations. These include individuals who claim to coordinate with contractors, but have no contractor's license themselves. Contracts with such people may be unenforceable if they take the Association's money but do not deliver on their promises. Others who might have a contractor's license may not have the experience or resources to adequately perform.
Berding|Weil will be publishing guidelines for protecting the Association from unfavorable or fraudulent construction contracts soon.
Showcasing volunteers with invaluable expertise, that are much needed when such disasters occur.
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