ARTICLE
14 January 2025

California Wildfires 2025: Navigating Insurance Claims And Maximizing Related Recoveries

PC
Pryor Cashman LLP

Contributor

A premier, midsized law firm headquartered in New York City, Pryor Cashman boasts nearly 180 attorneys and offices in both Los Angeles and Miami. From every office, we are known for getting the job done right, and doing it with integrity, efficiency and élan.
On January 7, 2025, the Palisades Fire erupted in Los Angeles County, fueled by powerful Santa Ana winds and dry winter conditions.
United States California Insurance

On January 7, 2025, the Palisades Fire erupted in Los Angeles County, fueled by powerful Santa Ana winds and dry winter conditions. As of this writing, the fire has consumed over 30,000 acres, destroyed approximately 2,000 structures, and forced the evacuation of 100,000 residents. Six subsequent fires – most notably Hurst and Eaton – have broken out in neighboring areas, exponentially increasing the devastation.

For countless homeowners and businesses, the flames represent only the first stage of an arduous recovery process. As residents begin to assess their damage, significant hurdles loom in securing insurance-related financial recoveries. These challenges have only been exacerbated by recent, widespread insurance policy non-renewals.

In this turbulent landscape, understanding your insurance rights and taking decisive action are critical steps in the effort to rebuild.

The Insurance Crisis: Policy Cancellations and Complexities

In wildfire-prone areas like Los Angeles County, insurance non-renewals have reached alarming levels. In recent months, several major insurers have opted to stop writing coverage for thousands of homeowners, citing increased wildfire risks and rising costs. This has forced many to rely on California's FAIR Plan, a state-sponsored insurance safety net that typically offers much more limited coverage than traditional policies.

For those fortunate enough to maintain coverage, the challenges do not end with having a policy. Insurers are increasingly scrutinizing claims, imposing stricter documentation requirements, and prolonging settlement processes. This leaves policyholders to navigate a labyrinth of procedures as they simultaneously grapple with physical displacement and financial uncertainty.

At times like this, it is essential for policyholders to know their rights and fight for all available coverage. With that reality in mind, the following is a high-level overview of the types of coverage that may be triggered by the wildfires and the essential steps that policyholders must take in order to maximize their insurance recoveries.

Individual Versus Commercial Coverage

Individual Policies: For individuals, the following lines of insurance are the most likely to respond to a wildfire loss: homeowners' policies, renters' policies, automobile policies, and watercraft policies. While most policyholders understand that they can recover for physically damaged property, they may not be aware of other potentially available coverage. Perhaps the most pertinent example is that almost all homeowners' policies include coverage for basic necessities when one is displaced from one's home as a result of a covered loss. This coverage includes the costs of food, clothing, and temporary housing – and insurance carriers will almost always advance funds for such essentials.

Commercial Policies: Business owners typically have an even broader array of potentially applicable insurance. For example, commercial general liability, cyber liability, marine cargo, and inland marine policies all have the potential to provide some level of wildfire-related coverage. That said, a corporate entity's first-party property policy (commonly referred to as an "all-risk" policy) is the line most likely to respond, as it generally offers the broadest coverage for natural disasters. Like homeowners' policies, first-party property policies cover damage to a company's physical plant. But such policies also provide coverage for other types of wildfire-related costs and expenses. For example, a typical all-risk policy will cover pre-disaster preparations, loss mitigation, business income losses (including losses caused by damage to key suppliers), extra expenses, debris removal, and blocked access to company facilities – just to name a few.

Essential Steps For Maximizing Insurance Recoveries

Recovering from a wildfire loss requires more than just filing a claim—it demands proactive planning, attention to detail, and persistence. The four most important steps are summarized as follows:

1. Identify All Applicable Policies and Coverages

In the aftermath of a natural disaster, the first and most important step for policyholders is to review and understand their coverage. This requires a careful reading of each potentially applicable policy – with a keen eye toward every provision, condition, and exclusion that could be implicated by the facts at hand. When it comes to insurance policies, the devil truly is in the details. Failing to comprehend the intricacies can easily push a claim across the fine line between a covered loss and a loss of coverage.

2. Promptly and Properly Notify Your Insurer

Once all potentially applicable policies are identified and understood, timely notice (i.e., tender) of claims is imperative. Most policies contain specific instructions regarding how and when notice should be tendered – and improper or untimely notice can defeat an otherwise valid claim. Notably, the specific wording used in the tender is very important, as saying the wrong thing can negatively impact the ultimate outcome. Unfortunately, the chaos that inevitably follows a catastrophic event like a wildfire can trip up even the most conscientious policyholder. Thus, the key is to be prompt but not hasty.

3. Document Your Losses in Detail

Your ability to recover depends heavily on the quality of your documentation. To the fullest extent possible, photograph and video-record all damaged property, including the exterior and interior of your home or business. Create a detailed inventory of lost or damaged items, noting their original purchase dates, values, and any available receipts or proofs of ownership. For businesses, document operational interruptions, lost revenue, and added expenses due to the fire. Meticulously organized records will strengthen your claim and help prevent disputes with your insurer. Moreover, displacement can come with significant out-of-pocket costs, such as hotel stays, meals, transportation, and temporary workspaces for businesses. Keep detailed logs and receipts for every expense you incur. Many policies include Additional Living Expenses (ALE) or Loss of Use coverage that can reimburse these costs, but only if you provide adequate proof. It is unfortunate, but true, that poor record-keeping can severely undercut the value of a claim.

4. Engage Professional Expertise

As indicated above, mistakes made in the immediate aftermath of a catastrophic event can significantly reduce the ultimate insurance recovery. For that reason, it is critical for policyholders to enlist the aid of insurance professionals from the very outset. Coverage counsel and forensic accountants are highly specialized practitioners who understand applicable policy provisions and know how to properly tender and comprehensively document a given loss. Insurance carriers rely heavily on such experts in dealing with catastrophic claims. Policyholders are well advised to do the same.

Conclusion

Recovering from a wildfire is a daunting journey, but it begins with careful review, careful documentation, and careful communication. At Pryor Cashman, we specialize in guiding policyholders through the minefield of complex insurance claims and recoveries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More