Shant Karnikian was quoted in The Washington Post on a coverage limit appearing in California home insurance policies: the wildfire deductible.
While reviewing a prospective client’s policy, Shant noticed a separate deductible that applied only to wildfire losses. On one AIG policy, the standard deductible was $100,000, but the wildfire deductible was $621,000. He recognized it as similar to a wildfire smoke coverage limit the firm challenged a decade ago for violating California consumer rights laws.
California law does not allow insurers to treat wildfire differently from any other fire. If a home burns, the loss is supposed to be covered. State regulators told carriers years ago to remove these deductibles from standard policies, but some carriers moved them into surplus line policies, the lightly regulated coverage Californians rely on as a last resort when no one else will insure them. The Post found current policies carrying wildfire deductibles of more than $3.5 million.
“The wildfire deductible isn’t common, and it is a bait and switch,” Shant told the Post.
After the Post’s reporting, the California Department of Insurance said Commissioner Ricardo Lara will launch a review of these surplus line policies. For the families who lost their homes in last year’s fires, Shant noted, the deductibles mean even less money on the table.
“Every dollar they can get back matters and makes a difference,” he said. “Where do we draw the line? What is next? It is a slippery slope.”