Written on behalf of Brian S. Kabateck | Kabateck LLP
December 2, 2016
When insurance companies underestimate the need for certain types of insurance (i.e., Hurricane Katrina victims), underestimate the cost of rebuilding (the victims of the 2003 Sand Diego County wildfires), or when homeowners neglect to report improvements to the home to their insurers, wide gaps in coverage result in significant losses to the insured.
It is important to remember that it is almost always the homeowner’s responsibility to report any changes to the property, the home itself or personal property— to the insurance company. Therefore, it is imperative that homeowners act often to re-evaluate their real property and provide the information in writing to their insurance company requesting full coverage for a total loss. Homeowners should ask their insurance agent if they have enough insurance, or better yet, ask in writing that their agent set the right amount of insurance for their house. Only then is the burden arguably shifted to the insurer to make sure they are complying with the homeowners demands and avoid the threat of bad faith litigation.
A 2010 J.D. Power and Associates customer satisfaction survey results found that 50% of American homeowners do not have a clear understanding of their home insurance coverage. Another study by Marshall & Swift/Boeckh, recognized consultants to the insurance industry, evidenced that two-thirds of Americans underinsure their homes. Insurance carriers are not required to ask their insured during each renewal period whether or not the insurance provided is sufficient to cover the home. As such, it is entirely the responsibility of the homeowner to make sure they have adequate insurance to cover any loss.
Consumers must realize that in the event of a total loss, the amount to rebuild can exceed the current market value of their home, leaving them underinsured. That is why consumers are well served to get the estimate from their insurance agent or real estate broker of what the full rebuilding costs would be, taking into account the added expenses of having to come up to current building codes if they have changed since the house’s original construction. This information should be revised each year to adjust for inflation, and the information should be provided to the insurance company and/or broker. Web tools such as AccuCoverage and HomeSmart Reports charge nominal fees to fill out questionnaires that can give high and low estimates of home replacement costs, as well as the average cost of construction in one’s area.
Experts encourage a yearly review of insurance coverage before renewing a policy, but polls show that many homeowners are not this vigilant. In order to obtain the right amount of coverage, one should factor in the cost to rebuild, the cost to replace contents, the extra cost of living expenses should one have to move out during rebuilding, and the liability to others who might be injured on one’s property.
Once an insurance company is made aware of changes in the home’s value, it is obligated to provide enough coverage to satisfy the full loss. If it doesn’t, and there is a loss that the policy limits cannot fully cover, the insurance company is potentially liable for bad faith. This may require bringing a civil case against the insurance company, which additionally requires an attorney experienced in bad faith litigation.
If you believe you or a loved one has fallen victim to the unfair or bad faith practices of an insurance company, you must learn more about your rights. Give one of our experienced insurance bad faith attorneys at Kabateck LLP a call today to learn more about an insurance bad faith claim, and to explore your options. Our insurance fraud attorneys in Los Angeles (LA) can help you achieve the maximum compensation for the harm you or a loved one has suffered by way of insurance bad faith.