Southern California Homeowner Fire Loss CASE STUDY

Viau & Kwasniewski fire insurance attorneys recently obtained a $1.5 million settlement against a major insurance company, on behalf of a homeowner (the insured) on the eve of trial.  The following is a synopsis and discussion of the case, how it started, how it was litigated, and why experienced California fire insurance attorneys were able to achieve such an excellent result for the homeowner.

(NOTE: For assistance with legal terms contained herein, please refer to our Glossary of Terms)

Background Facts:
The Fire Loss, And Use Of Water For Fire Suppression

The insured’s home caught on fire in the early hours of November 10, 2005.  The insured, including his extended family, his son, daughter-in-law and two grandchildren, were able to get out of the house in time to avoid injury.  However, the family home sustained extensive fire damage to the second floor interior, the structure, and the fire burned through the roof.  The lower floor sustained extensive water damage from fire fighters’ efforts to extinguish the fire.  There was also smoke damage throughout the home.

The insured notified his insurance company of his loss the morning of the fire.  The insurance company’s initial adjuster sent out an “emergency preferred vendor” to board up and tarp the roof.  It was apparent to the emergency preferred vendor that immediate dry out of the house was necessary.  It was also apparent from the claim file that the insurance company’s first adjuster knew that there was water in the home from the fire extinguishing efforts.  However, the adjuster did not authorize the insurance company’s emergency preferred vendor to dry out the house.

Mold Formation
Due To The Necessary Use Of Water To Extinguish The Fire:

On November 12, 2005, the insurance company’s large loss field adjuster (the second adjuster assigned to the claim) inspected the insured’s home.  This adjuster observed that the house was wet and needed immediate dry out.  He took no steps to get the home dried out, did not include dry out in his scope of repairs, and did not inform the homeowner/insured that immediate water extraction was necessary to prevent the formation of toxic mold.  These acts and omissions were particularly unreasonable given that this insurance company advertises on its website that it provides emergency preferred vendors to extract water from a home to prevent further damage, and, the water damage constituted a covered loss.

A home with a water soaked interior cannot be immediately restored unless it is promptly and thoroughly dried out.  If the home is not properly dried out, and mold forms, then a complete and proper mold remediation must commence before major restoration begins.

Yet, nothing was done for the insured and his family regarding drying out of the insured home.  As a result, toxic mold developed in the home.  This occurred because it was the insurance company’s apparent internal policy to not dry out insured homes subsequent to fire suppression activities – including a home deluged by water by fire fighters.

The Dispute Between the Insurance Company And the Insured Regarding the Cost To Restore the Family Home:

After the fire was extinguished at the insured family home, one of the fire fighters told the homeowner/insured that he should hire a public adjuster to help him with his claim.  Upon this advice, the insured hired a public adjuster.  He also hired a contractor of his choice to make the home restoration repairs.

The insurance company large loss field adjuster initially determined that the Replacement Cost Value (RCV) of the loss was $64,772.03 to restore the home and then after arbitrarily deducting depreciation determined that the Actual Cash Value (ACV) was $51,834.44.  The insurance company then sent a check for $51,834.44 and informed the insured that it was going to close its file.

The insured’s contractor of choice determined that in fact, it would cost about $172,000 (Replacement Cost Value) to do the job properly, and to fully restore the home to its pre-loss condition.  The insured’s contractor of choice was an experienced general contractor, having completed over 600 fire restorations before this loss.  The difference between the insured’s contractor’s estimate and the amount that the insurance company paid was over 2.5 times, or, more than a 150% difference.  The insurance company’s estimate was ridiculously and unreasonably low.

Using the estimate of the insured’s contractor, the insured’ public adjuster pointed out to the insurance company that the insurance company’s scope left out over 200 repair items, and that it was impossible to repair the home for the amount of the insurance company’s estimate.  One of the major items ignored by the insurance company was the extensive structural repairs that were necessary to replace the roof rafters and burned floor joists.  After the public adjuster pointed out in writing this gross deficiency, as well as the other missing items in the insurance company estimate, the insurance adjuster only increased his RCV up to $74,288.17 and ACV to $58,594.72, and paid the insured an additional approximate $6,700.  This was still grossly below the insured’s contractors’ restoration scope and estimate.

In an attempt to get an agreed to scope for the insured that was reasonable, the insured’s public adjuster scheduled a meeting with the insurance company large loss adjuster, the insurance company’s contractor, the public adjuster, and the insured’s contractor.  The purpose of the meeting was to have the individuals walk the damaged home, and compare their lists of home repairs so that they could reach an agreement as to what had to be done – the scope of work.

The insured had just had major surgery on his leg before the fire.  The insured had been in a wheelchair for some time.  During this period that restoration scopes and estimates were being prepared for his home, the insured had steel rods sticking out of his leg, and was unable to drive.  The insured had to arrange transportation to the meeting, to let the adjuster and other individuals into the house for the inspection.  He was running late for the meeting and informed his public adjuster that he would be there shortly.  About 15 minutes before the insured arrived, the insurance company adjuster and the others agreed to reschedule the meeting.  During the next three weeks the insured’s public adjuster repeatedly attempted to reschedule the “walk through” meeting with the insurance company adjuster.  However, the insurance company adjuster refused to agree to a time to meet with the insured’s public adjuster and contractor at the insured’s home.  The follow-up meeting did not take place because of the insurance company adjuster’s unreasonable refusal to attend.

In an attempt to justify his unreasonably low restoration scope and repair estimate, the insurance company adjuster sent his scope to a purportedly “independent contractor.”  The adjuster e-mailed his scope to this “independent” contractor.  This contractor selected by the insurance company that had worked on prior losses with this insurance company adjuster, essentially “rubber stamped” the unreasonably low insurance company scope and later admitted under oath that it was not an independent scope.  This was a fraudulent attempt to justify the insurance company’s lowball estimate.

The insurance company adjuster then sent a misleading letter to the insured stating that the insurance company’s contractor was “independent,” and that it could conduct the repairs to the insured home in the amount of the insurance company’s estimate.  The adjuster concealed the fact that his contractor did not prepare his own independent scope, but instead just adopted the insurance company’s deficient scope.   This is a common insurance company trick.  They have contractor’s that will agree to their unreasonably low estimates to try to get the job with the expectation that they can make it up with supplements.  This is essentially fraud and is improper.  An insured is entitled to the most accurate total cost estimate up front and not a low ball estimate that under cuts honest contractors. These lowball contractors often do a substandard job and the homeowner is left with the consequences of a poor home repair job.

The insurance company’s contractor further informed the insured that he knew he could not repair the insured’s home for the amount of the insurance company’s estimate.  However, this contractor told the insured to “trust” him because he had a special relationship with the insurance company – he stated that he could get more money out of the insurance company.  The insured did not trust this contractor, and believed that the contractor was acting in concert with the carrier.  It was later determined that the insurance company contractor had been the subject of complaints by various insured’s for doing very poor quality work.

The insurance company knew that it was unlawful to try to force its contractor upon the insured, without at least advising the insured in writing that the insured had the right to select his own contractor.  It is improper for an insurance company to even suggest another contractor to the insured – unless the insured specifically requests such a referral.  The insured never requested any such referral, because the insured had already hired his own contractor, and the insurance company never informed the insured in writing that he had the right to select his own contractor.  All of these acts and omissions by the insurance carrier were violations of the California Fair Claims Settlement Practices Regulations as reproduced on the Viau & Kwasniewski web site.

The insured’s contractor of choice did not begin repairs because it could not get an agreed scope from the insurance company.  The insurance company simply refused to change its position regarding what the public adjuster and the insured perceived as the insurance company’s lowball restoration scope and estimate.  After fighting with the insurance company for over nine months to get an agreed to scope so the insured’s contractor could begin repairs, the insurance company stopped paying for the insured’s Alternative Living Expenses (ALE) .  The insured’s contractor of choice refused to start the job without an agreed to scope with the insurance company.  The insured’s public adjuster advised the insured that he should retain the services of California fire insurance attorneys and pursue litigation.  The insurance company forced the insured into litigation.

Mitigation of Damages:

After the insurance company cut off the insured’s ALE, he had to continue to make house payments and needed a place to live.  The insured tried to find a reputable contractor to start fixing up his home with the little money he had been paid by the insurance company, so he could at least move into the first floor bedroom to reduce his living expenses.  His extended family had at that time found other places to live.  No licensed contractor would agree to start the repairs with the money that the insured had been paid.  However, the insured found a company that repaired the lower bedroom so he could live there until the claim was resolved by litigation.  At that time, the insured was not aware of the mold.  His exposure to the mold, when he attempted to live in the lower bedroom, caused him harm and injury.

The Ensuing Litigation:

Viau & Kwasniewski took on the case to fight the bad faith insurance company and filed it in Los Angeles Superior Court Central District.  After initial investigation, the fire insurance lawyers at Viau & Kwasniewski were concerned that mold had developed in the insured home, given that the insurance company did not dry out the home at the commencement of the claim.  Viau & Kwasniewski fire insurance lawyers hired a company frequently used by insurance companies to test for the presence of mold in the home.  The test results indicated high levels of Penicillium/Aspergillus in the insured’s home.  Some forms of Aspergillus are known to be toxic, and can cause bodily harm.  This of course caused significant concern to the insured because he had been living in the lower bedroom in the house to mitigate his damages.

The insured attempted to secure alternative living arrangements.  The insurance company refused to pay for such arrangements after the summer of 2006.  Because the insured still had to pay the mortgage on the home in which he could not live, he could not afford to pay additional rent for alternative living arrangements.  The insured made arrangements to live with his parents; however, this proved difficult because of logistics relating to his work.  All of this harm, distress, and expense constitutes part of an insured’s damage in an insurance bad faith case.

Aggressive Litigation Is Important
In A Bad Faith Case Against An Insurance Company:

As often occurs in litigation against insurance carriers, the case was actively litigated by Viau & Kwasniewski fire insurance attorneys.  Over 20 depositions were taken, including the depositions of 5 retained experts and 6 non- retained experts.

Viau & Kwasniewski fire insurance lawyers took videotaped depositions with instant visual display and conducted extensive written discovery, as well.  All of these efforts were done to maximize the insured’s recovery.

Issues Regarding An Insurance Company’s Pattern & Practice:

Viau & Kwasniewski fire insurance lawyers additionally pursued Colonial Life discovery.  It is the law of the State of California that an insurance company may not engage in a pattern of practice of wrongful claims handling.  How a California insurance company handles similar fire claims is of the utmost importance:  By engaging in a conscious and willful pattern and practice of wrongful denial, wrongful delay, purposeful refusal to objectively investigate, and discrimination, the insurer unlawfully reaps a significant profit at its insured’s’ expense.

The California Legislature and the California courts implemented laws expressly designed to preclude such wrongful practices by California fire insurance companies.  These laws support an insured’s efforts to obtain relevant and pertinent information regarding how a California fire insurance company handles certain “other claims.”

Particularly in California insurance bad faith cases, the insurance company’s “mind set,” and any purported pattern and practice of wrongfully handling and delaying particular kinds of insurance claims is of the utmost importance.  Typically, and logically, this information is in the possession of the California insurance company itself.  The manner in which insured’s may obtain this discovery was first discussed in the case of Colonial Life & Acc. Ins. Co. v. Superior Court (1982) 31 Cal.3d 785.  This discovery relates to the California insurance company’s handling of other similar fire insurance claims made by other insured’s.

The California Supreme Court, and the courts in uniform decisions since 1982, specifically hold that such discovery is relevant, is not privileged or protected so long as it proceeds as outlined in Colonial Life, and properly protects the other insured’s’ privacy interests.

Viau & Kwasniewski fire insurance lawyers believe that this Colonial Life discovery is important and relevant.  This discovery is not an attempt to merely “annoy” the California insurance company, as many carriers improperly believe.  The information is relevant, important, and pertinent to insurance bad faith issues.  Viau & Kwasniewski fire insurance attorneys have pursued this information in insurance bad faith cases, including in proceedings before the Court of Appeal.

Additional evidence was obtained during the depositions of another public adjuster and the insured’s contractor, that this particular fire insurance company adjuster was lowballing other insured’s.  This was additional evidence of a pattern and practice of insurance bad faith claims handling.  Further the California insurance company adjusters’ managers admitted in their depositions that they ratified and approved the insurance company adjusters’ conduct.  This was very important because it potentially exposed the California insurance company to punitive damages.

Mediation:

The courts typically order parties into Mediation, as well.  Mediation is a process by which the parties to a lawsuit attempt to resolve a case without having to go all the way through trial.  A Mediation typically is conducted with the aid of a neutral, third party Mediator.  The Mediator often is a lawyer, a retired Judge, or a Court of Appeal Justice.  The parties in a case do not provide testimony at a Mediation.  A Mediation is an informal process, and it is up to the parties and their lawyers whether or not a case settles; the Mediator cannot force the parties to settle the case.

A Court-Ordered Mediation was scheduled in the summer of 2007.  No California insurance company adjuster or company representative attended, other than the carrier’s lawyer.  No settlement offer was made, and of course the case did not settle.

Litigation in the case continued.  Further settlement conferences were ordered and took place.  The case did not settle.

Viau & Kwasniewski Bad Faith Lawyers
Beat The Carrier’s Motion To Dismiss The Case:

The California insurance company lawyers filed what is called a Motion for Summary Judgment/Adjudication, taking the position that the insured’s case had no legal merit and that the insured could not pursue punitive damages.  Viau & Kwasniewski fire insurance attorneys vigorously opposed the Motion.  The Court denied the California insurance company’s Motion in its entirety.

Trial Was To Proceed
Viau & Kwasniewski’s Efforts Resulted In A Settlement On The Eve Of Trial:

The Final Status Conference was set for October 11, 2007.  Trial was set for October 23, 2007.  The parties prepared and filed all of their Pre-Trial documents, including:  Motions in Limine; Oppositions and Replies to Motions in Limine; Joint Statement of the Case; Joint Exhibit List; Joint Witness List; Jury instructions; and Trial Briefs.

The case was hard fought.  It was clear that the insured and the Viau & Kwasniewski fire insurance lawyers were fully prepared and looking forward to trying the case and fight the bad faith insurance company.  At the end, and on the eve of trial, the carrier paid the full amount of the insured’s demand.  Viau & Kwasniewski fire insurance attorneys were able to achieve this result by their hard work, thorough knowledge of California insurance issues, ability to validly gain the trust of the insured, and total preparedness.

Homeowner insurance claims can be difficult, and there are numerous potential pitfalls.  For example, the California insurance company here argued that the initial dry out was not covered under the homeowner’s policy.  However, where there is coverage under the insurance policy, in order to conduct a proper home repair to a home that has been deluged by water, the carrier should make sure that the home is dried out.  An analysis of the California insurance policy provisions and coverage issues must be made.  Viau & Kwasniewski fire insurance attorneys have in-depth expertise in conducting such analyses and vigorously opposed the insurance company’s repeated attempts to convince the court that there was no coverage to dry out the home.

At one point the California insurance company’s lawyers went so far as to quote language out of a different policy to try to support their position that there was no coverage for the dry out.  This misconduct by the insurance company lawyers was discovered by a careful coverage analysis by the Viau & Kwasniewski fire insurance lawyers and was presented to the judge in a multi-page trial brief.  In the end, the California insurance company and its lawyers gave up their nonsense, and realized that if the case went to trial it was going to result in a very bad result for the insurance company. The carrier and their lawyers came to this conclusion only after the case was fully prepared for trial, and their insupportable arguments and repeated requests for delay were vigorously opposed by the insured’s fire insurance lawyers.

Summary

This California fire insurance settlement result came about primarily because of the aggressive, thorough, and competent preparation of the case by the Viau & Kwasniewski fire insurance lawyers, and their determination to try the case aggressively and fight the bad faith insurance company.

If you have a serious dispute with your California homeowner insurance company be sure to consult lawyers with the in depth, hands-on experience and knowledge in California insurance matters.  For more information on bad faith insurance or California homeowner fire insurance representation, please complete our online Contact Us Form, send an email or contact our California fire insurance attorneys by phone,
Toll Free at 1 (833) 633-1095 or (213-225-5855)