Fire victims in California may not get from their insurance companies what they expect

Published on

CBS Evening News (6:30 PM ET)

DAN RATHER, anchor: In the wake of this week’s devastating wildfires, thousands of Californians
are faced with rebuilding not only their homes, but their lives. And many, if not most of them will depend on insurance money to get started. But they may not get all they hoped for or expected. CBS’ Sandra Hughes has been digging and asking questions for CBS’ Friday Consumer Alert.

Mr. DAN STOVER (Fire Victim): I’m sorry. You gonna actually take notes today of the…

SANDRA HUGHES reporting: Dan Stover and his insurance adjuster are trying to reconstruct the last dozen years of his life from the ashes.

Unidentified Woman #2: What was that large metal…

Mr. STOVER: That was my freezer.

HUGHES: It’s a painstaking process that has its pitfalls.

Mr. STOVER: I don’t know how they can do this for 1,000 or 1,500 people. That’s what’s amazing.

HUGHES: Sometimes they don’t. After the 1994 Northridge earthquake, homeowners learned their policies didn’t always cover everything.

Mr. JOHN GARAMENDI (California Insurance Commission): What the insurance companies were doing then is slow pay/no pay and just lowballing the claims.

HUGHES: Underestimating values to the tune of $250 million. Almost every major insurer was found to have been involved.

Unidentified Firefighter: …(Unintelligible).

HUGHES: Before these blazes, California was already in an insurance crunch. Homeowners found themselves unable to get insurance after being blacklisted for making small claims like water damage or even just inquiring about claims.

It’s not just in California that insurance companies have been accused of foot-dragging and using disasters to either raise premiums or cancel policies.

In 1992, on the day Hurricane Andrew blew into southern Florida, the major insurer AIG sent this memo out, saying ‘This is an opportunity to get price increases now.’

Mr. DOUG HELLER (Foundation for Taxpayer & Consumer Rights): The insurance industry is in the position of power, so when you have an industry in the position of power, you need to have a police present, the regulators, the insurance commissioner with a watchful eye making sure that they don’t cheat us.

HUGHES: California’s insurance commissioner has already made his presence known, warning insurers he’s watching.

Unidentified Woman #2: This is our home.

Mr. JEFF BEYER (Farmers Insurance): And this is–this is–oh, my God.

Unidentified Woman #2: It’s home.

HUGHES: At least one insurance company based in Southern California has already vowed not to raise insurance premiums.

Mr. BEYER: We’re in the business to deal with disasters. This is part of the insurance business.

HUGHES: But if history is any indicator, there are many Southern California homeowners who could be burned twice by this disaster. Sandra Hughes, CBS News, San Bernardino.

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