Navigating Insurance for the Los Angeles Wildfires: What You Need to Know

In Short

The Situation: The Los Angeles wildfires, which began on January 7, 2025, have caused widespread devastation, destroying homes, businesses, and communities, while displacing thousands of residents. Insured loss estimates currently exceed $30 billion.

The Result: Individuals and businesses are looking to insurance to assist with rebuilding or repairing their homes and work spaces, replacing their personal property, and covering their additional expenses or lost income caused by the wildfires.

Looking Ahead: While navigating an insurance claim may feel overwhelming at this time, immediate action is critical for preserving and maximizing insurance coverage. Important first steps include identifying and providing notice under all potentially applicable insurance policies and documenting your losses.

The Los Angeles wildfires have left a path of destruction, displacing families, destroying homes and businesses, and testing the resilience of communities. As residents and businesses work to rebuild what they have lost, insurance can provide at least a partial pathway toward recovery. This Commentary provides practical tips for navigating the insurance claim process to maximize recovery and avoid common traps.

Key Action Items

Navigating the complexities of insurance claims for wildfire losses may feel daunting. However, there are a few immediate steps at the outset that can be critical for preserving and maximizing coverage. If you have suffered a wildfire loss, you should:

• Identify and obtain copies of all potentially applicable insurance policies. Multiple policies could apply to your claim. For example, individuals may have homeowners, condominium renters, and auto policies. Businesses may have commercial property with business interruption and extra expense coverage. Individuals and businesses may also have umbrella or excess policies, along with any specialized policies, such as builders risk or agricultural policies. To ensure that you have accurate and final copies of your policies, ask your agent or broker for copies of all potentially applicable policies.
• Provide timely notice of your claim. If you have not done so already, immediately provide notice of your claim under all policies that may apply. Your insurance broker or agent can help you provide notice. When initially alerting your broker or agent, avoid characterizations about your loss. Simply inform them that the wildfire conditions resulted in loss to your home (or business) on or about January ___, 2025, and ask them to confirm their receipt of your notice under all potentially applicable policies. If you provide notice yourself, be sure to follow the specific instructions in the policy, paying careful attention to where and how notice should be sent and to whom it should be addressed.
• Document your loss and additional expenses. Collect and maintain photos and other documents evidencing your loss, including: photos and other information about your property before and after the wildfire; estimates, communications and other documents in connection with rebuilding or repairing your property; expenses incurred from not being able to use your property (such as rent, additional gas, clothing, laundry, meals, etc.); and lost profits if you are a business.
• Document communications with insurers. Maintain a log of your communications with insurers or their representatives (including the date, name of the representative and what was discussed). Communicate with the insurers in writing when possible, and confirm oral communications in writing. These records will provide evidence of any insurer delays, which could support a longer period of recovery. Additionally, when an insurer confirms that you may take certain steps (enter into a rental agreement, purchase certain items, etc.), documenting those communications can be critical if the insurer later claims that it provided no such confirmation.
• Comply with all policy requirements and deadlines. Read the policy carefully and comply with all applicable requirements and deadlines. For example, property policies often have "proof of loss" requirements and deadlines, and may require insurer consent before taking certain actions, such as debris removal. Some policies also have "suit limitation provisions," which bar the policyholder from suing the insurer after a certain period of time (such as one year after the date of the loss). If you anticipate running up against any deadline, ask the insurer well in advance to extend (or toll) the deadline.
• Consider asking for an advance. Depending on the circumstances of your loss, your insurer may be required under California law to advance a portion of your insurance proceeds. Even if you are not entitled to an advance under California law, the insurer may accommodate your request.
• Be persistent in pursuing your claim. If your insurer denies any portion of your claim or attempts to limit coverage in any way, ask the insurer to identify the provision(s) in the policy that allows it to do so. If your insurer continues to attempt to limit coverage, consider consulting with an insurance coverage attorney.

Know the Scope of Coverage

Having a clear understanding of the type (and maximum amount) of coverage available under your policies will help streamline the recovery process. Many individuals have homeowners, condominium, or renters policies. These policies typically include coverage for:

• The dwelling (and other structures, such as garages, decks, and fences if extended coverage was purchased);
• Personal property (such as furnishings, housewares, clothes, and other personal possessions); and
• Loss of use or additional living expenses ("ALE"), which includes additional expenses incurred because of the inability to use the dwelling (such as lodging, additional gas, laundry, meals, etc.).

The amount of money available for each category of coverage will depend on the specific language of the policy, including the policy limits. For example, "replacement cost" policies pay the cost to rebuild or repair your dwelling and replace your personal property. "Actual cash value" policies are limited to the market value of the property, taking into account its age and wear and tear (or depreciation), which may be less than the replacement cost.

The policy limits (which are found on the "declarations" page of the policy) dictate the most the policy will pay for each category of coverage, regardless of whether the policy covers "replacement costs" or "actual cash value." For example, a "replacement cost" policy with $1 million in limits, may only pay $1 million, even if the actual replacement costs exceed that amount. However, extensions of coverage (such as additional limits for debris removal) may be included in the policy, which could increase the limits. In addition, there may be various consumer protection laws available to you that may obligate the insurers to pay additional amounts. When calculating the amounts potentially available under your policy, you should read the entire policy thoroughly, paying careful attention to any extensions of coverage.

Many businesses impacted by the wildfires will look to their commercial property policies for relief. Such policies typically cover:

• Damage to structures and buildings;
• Damage to physical property (such as equipment, inventory, computers, tools, and furnishings); and
• "Business Interruption," which includes lost profits, continuing operating expenses, and extra expenses (such as rent for temporary space).

If you have a claim for coverage under a commercial property policy, you should carefully review the policy and follow the steps outlined above to determine the amount of coverage potentially available under your policy and ensure that you are complying with all requirements under the policy to preserve and maximize coverage.

Know Your Statutory Rights

California has robust insurance consumer protection laws that may expand your rights and simplify the claims process. These laws address important practical considerations, including but not limited to:

• Advanced payments for living expenses and personal property (without itemization);
• Time limits for collecting policy proceeds;
• Insurer obligations to identify items it believes would be covered as additional living expenses, or ALE;
• Extensions of time periods for ALE coverage;
• Alternative remedies for homes rendered uninhabitable;
• Easing requirements for inventorying personal property (e.g., allowing grouping of categories);
• Coverage for building code upgrades without impacting policy limits;
• Limitations on policy cancellations/non-renewals;
• Options to use policy proceeds to purchase a new home or rebuild your home in a new location; and
• Extensions of time to sue insurers.

The impact of these statutory protections on your claim may depend on your individual factual circumstances and policy language. Insurers are required to comply with these laws. If you suspect that your insurer is not complying with any laws or the provisions of the policy, you can contact the California Department of Insurance or consult with an attorney.

Two Key Takeaways

1. Insurance may be a vehicle for recovery, but it will not drive itself. Policyholders need to actively pursue their claims and advocate for themselves by immediately providing notice under all potentially applicable policies, documenting their losses and communications with insurers, complying with all policy requirements and deadlines, understanding what is covered (and for what amount), and being prepared to fight for their rights if necessary.

2. California has numerous insurance consumer protection laws that may expand policyholders' rights under their policies and/or ease the burden of the claims process.