Why Sue PG&E If You Have Homeowners Insurance?
Many North Bay and Butte County fire victims did not have insurance at the time of the disasters or were significantly underinsured. For those residents, a lawsuit against PG&E may be a necessary or obvious next step. But some homeowners feel their policy limits are adequate to cover their losses. While policies differ, the information below highlights areas where nearly all residents, even those with better coverage, might still experience a shortfall in insurance as well as additional damages outside the policy.
Insurance Alone May Not Be Enough
Replacement cost of the dwelling. Following the October 2017 fires, the cost for labor and materials increased across the North Bay, with the price per square foot to rebuild ranging from $250 to as high as $600 or more. In addition, expenses for architectural plans, structural engineering, and building permits typically fall under the dwelling limits of your policy. Losses can be compounded if you recently made renovations or upgrades to your home without an accompanying increase in coverage limits. Most importantly, you are not obligated to incur debt or borrow from other coverage categories (such as your personal property) to make up for a shortfall in replacement cost.
Trees and landscaping. Most policies provide minimal coverage for damage to trees, landscaping, and vegetation. For example, your policy might provide an additional 5% of your dwelling limit for these losses, but impose a maximum amount of $500 or $750 for damage to any single tree, plant, or shrub. The replacement value of a single mature tree, however, can be worth $20,000 and even up to $40,000 or $50,000. Therefore, tree and landscaping losses can be significant, especially for larger or more forested lots. While a settlement of the PG&E litigation cannot reasonably provide full replacement value for every lost tree given that over 245,000 acres were burned, you are entitled to pursue these damages to the extent recoverable.
Building code upgrades. For homeowners who choose to rebuild their home or remodel at a new location, the cost to comply with current building regulations can be significant. Some policies provide building code upgrade coverage (also known as Ordinance and Law or ONL) as additional insurance. In other policies, this coverage is subject to and included within the stated dwelling limits. In either case, homeowners often experience a shortfall in this category.
Diminution in property value. Insurance covers the structures on your property but does not protect against a loss in property value. If you do not rebuild, your legal damages would still include the decrease in fair market value of your property. This amount would be offset, however, by any insurance payments you receive related to the dwelling and other structures, such as actual cash value or base limits.
Contents. Given the extent of damage in most cases, your contents coverage might fall short of your actual losses. Further, most policies contain special limits of liability for certain categories of personal property, such as money, gold, silver, watercraft, business property, or motorized equipment. Other categories can be entirely excluded from coverage, such as animals, motor vehicles, property in a rental unit, or property of non-relatives.
Additional Living Expenses. Homeowners insurance often limits payments for additional living expenses by imposing a time limit, or a dollar cap, or both. Following a declared disaster, California law requires that insurers make ALE coverage available for up to 24 months, subject to the other terms of your policy (such as the stated dollar limit or showing “reasonable progress” toward rebuilding or replacing your home). In September 2018, the California legislature passed SB 894, which increased this minimum time period to 36 months. Because of insurance industry lobbying, however, the new law was not applied retroactively for the benefit of October 2017 fire victims, for whom the 24-month period still applies.
Soil. Some insurance policies expressly exclude coverage for soil erosion, soil testing, prevention of runoff, or other expenses related to protecting, stabilizing, or restoring your land. These costs can present an unexpected shortfall in coverage, particularly for hillside lots as well as those the Army Corps over-excavated during debris removal.
Business losses. Absent a specific endorsement, your homeowners policy might not cover business losses such as lost income, interruption in business activity, or damage to business property.
Structures rented to others. Unless noted on your Declarations, your policy might also exclude coverage for any structure separate from the main dwelling that is used as a rental property.
Crops and livestock. This is another category of economic damages for which your homeowners policy might not provide adequate coverage.
Inflation. While some policies allow for inflation adjusted limits at the time of loss, many policies do not account for inflation or interest when calculating your insurance payments.
Additional Damages Not Covered By Insurance
In addition to economic damages, most fire victims experience some level of non-economic harm such as emotional distress or mental anguish. Homeowners insurance does not provide any coverage for non-economic losses. For those impacted by the North Bay fires, these damages are real, ongoing, and in many cases substantial. Non-economic damages can arise from:
- Harm to loved ones
- Harm to pets
- Fleeing from the fire and associated trauma
- Loss of family heirlooms and photos
- Loss of the use and enjoyment of your property
- Decline in your family’s standard of living
- Loss of community and livelihood
Irrespective of your insurance policy, you are entitled to pursue compensation from PG&E for your non-economic legal damages based on the utility’s alleged role in causing the fires.
Your Insurance Company is Already Suing PG&E
Some homeowners are surprised to learn that their insurance company is already a party to the lawsuit against PG&E. The insurance companies have filed suit as plaintiffs seeking reimbursement of the amounts they have paid to their customers (i.e., you) for fire related losses. This is known as subrogation.
In other words, your insurance company is pursuing reimbursement regardless of whether you file your own claim against PG&E.
Under California law, however, an insurance company generally may not enforce its right to subrogation until you have been fully compensated for your losses. This is known as the “made whole” doctrine. Therefore, to the extent any settlement funds from the PG&E lawsuit might be limited, we encourage you to assert your right to full recovery ahead of the subrogation plaintiffs.
Most importantly, your insurance company will not pursue a separate action against you based on your recovery of damages from PG&E. Instead, any settlement you receive from the PG&E lawsuit will be reduced by the amount your insurer has already paid toward the same losses. Thus, you will not receive an impermissible double recovery for any category of damages while still pursuing your right to be made whole following this disaster.
Learn More About Joining the PG&E Lawsuit
Our attorneys welcome any questions you may have about joining the PG&E lawsuit. At our firm, our goal is to minimize the burden of litigation and help guide our North Bay clients toward financial recovery. To discuss your case with an attorney at no cost, please contact our office by phone or through our brief online form at any time.