Smoke and Mirrors Ep 5-1
===

[00:00:00] It has been one year since the Deadly Eden and Palisades fire in Southern California. 31 people died as the fires burned for more than three weeks, and cleanup efforts took seven months. About 13,000 homes were destroyed, and since then. Fewer than a dozen have been rebuilt. One word keeps coming up when talking about property insurance.

In California, it's crisis insurance was supposed to be the safety net that helped families get home after a disaster. Instead, for too many of us, delays and underpayments have become a wrecking ball Today, protestors gathered saying they were failed during the fires and during the rebuilding process.

Rossano Verde saw something insurance companies don't want you to see. I live in Eaton Canyon, which is actually a little finger of Pasadena where everything else around it is Altadena. Uh, and I live, um, [00:01:00] approximately 300 yards from the Edison Tower. That caught fire that night. Um, and I'm a smoke damage survivor.

Amazingly, the Pasadena Fire Department saved our house, uh, but it is filled with the toxic levels of lead arsenic. A few days after the in fire, Ana saw that employees of the remediation company, ServPro, was at her neighbor's house, so she asked if they could do an inspection of her home. They estimated it would cost around $68,000 to clean it.

State Farm received the estimate, but it didn't respond for quite some time. But ultimately, insurance then responded to Serv Pro's estimate, and ServPro sent me that estimate, uh, accidentally. And what I discovered was it's 58 pages long of minutiae. W you know, will clean the doorknob in this room and the, you know, like that.

A State Farm went through in red ink [00:02:00] and redlined all through those pages. Things like, we'll clean this ball, but no, we won't clean that ball. We'll clean the doorknob and we'll clean the top of the door, but we won't clean the door itself. They just went and made 58 cages of arbitrary red lines that cut it down to 19,000 when the Spro original estimate was 68,000 to do the cleaning.

And this was before we found out about the tox chemicals, uh, that have been left behind it now require specialized cleaning. The redline report was so shocking to Rosanna that she called up Surf Pro to ask if she was actually reading it correctly, and they said, no, you are reading that correctly. And, uh, I, I was stunned Frank with that.

Um, this is what they do, you know, it's just arbitrary how an insurance company can pay to clean one part of a door and not the other is [00:03:00] definitely a head scratcher. Especially if no good testing was performed in the first place. But it's a look at an insurance company practice that policy holders have suspected but rarely caught a glimpse of insurance companies running interception on the home cleanup process without you even knowing about it.

After State Farm got its hands on, the rapport, Rosa's Home would be left full of carcinogens. This is Smoke and Mirrors an investigative podcast series from Consumer Watchdog. I'm Justin Klasko, and this is episode five. Fighting Back.

Right now, insurance companies must retain all documents related to a claim. But policy holders can't see them. This lack of transparency leaves policy holders in the dark about how the final insurance payout amount is calculated. In many cases, homeowners only see the final edited version of the estimate from the [00:04:00] insurer.

It raises the question, in order to low ball policy holders, how often are insurers altering original estimates? For example, ServPro was instructed by State Farm to do certain things according to the San Francisco Chronicle. Quote, do not provide the insured. The estimate end quote said ServPro in one of its guidelines.

Eventually, Rosanna and her husband paid about $6,400 to do testing themselves, and it revealed elevated levels of nickel, led an arsenic. So we finally got reimbursed right before Thanksgiving when the investigation is announced, she's referencing the LA County Council's investigation into State Farm that spurred the insurer to send millions in checks that had been withheld.

But that took eight months as well as bugging their local assembly. Man, we got a big check, uh, after the, um, investigation was announced. However, they're still fighting us on replacing the HVAC system. Um, we've given them two, [00:05:00] uh, bids and two opinions from two companies that it cannot be cleaned. It has to be replaced, and our industrial hygienist has sent them things, but they, they're still maintaining that it can get cleaned.

And now they told us yesterday. They're going to send out their own vendor to give a an opinion.

Hidden red lines are one devious game insurance companies play. They also like to run delays in hopes that policy holders will give up the fight on recouping their losses. Claire Thompson, an Altadena resident, and Eaton fire survivor is still playing the waiting game with her insurer. State Farm. We filed the claim about a day or two after the fires.

Uh, so it's been a year and there hasn't been any movement in our claims. Just delays according to Claire. A report by a certified industrial hygienist found her home to contain lead levels that well exceeded federal limits. [00:06:00] And she said other heavy metals like beryllium, cyanide, and arsenic were also found at exceeded levels.

State Farm actually paid for the test but ignored it. So after our own insurance provider wanted to bring in their own contractors, they've all withdrawn from our claim after we asked for just basic credentials and safety protocols. So just ask them for a license. They all backed out. And so because of that, uh, our investigation has been delayed for a year.

So Claire's home has to basically be gutted down to the studs, but hasn't been touched for a year. All of our contents, all of our appliances, are considered a total loss because they absorb so many toxic VOCs, like benzene, formaldehyde, there's metal and everything lead that. It gets into the cracks of flooring and the, uh, drywall and the insulation.

It calls into the grout lines, in your bathrooms and in your fireplaces, so everything in our home needs to be completely gutted.[00:07:00] 

According to a September, 2025, department of Angel Survey of LA County fire survivors, 55% of those with structural and smoke damage said their insurance estimates were far below the actual cost. And 57% said they were subject to poor, inconsistent, or delayed communications. But this year, lawmakers, advocates and fire survivors are looking to change the issues of the transparency and delays that insurance companies are taking advantage of.

Recently, California State Senator Sasha Renee Perez proposed two bills that if passed by the California legislature and signed by the governor will aid fire survivors during the recovery process. Senate Bill 8 7 7 and Senate Bill 8, 7, 8, the games that are being played by these insurance companies with loss estimates and [00:08:00] creating reduction reductions that can sometimes ex.

Seed a hundred thousand dollars and families never see the original numbers, and these reductions oftentimes are insufficient to cover the total damage or rebuilding costs. That's why we are introducing legislation SB 8 77 that will provide transparency and accountability to insurance claims.

This legislation is going to. Require that insurance providers properly document and disclose all lost estimates documents, including changes to the policy holder. Those documents should not be kept in secret. You as the policy holder, deserve the right to know and you need to be able to hold your insurer accountable Under SB 8 78.

The insurance Payment Accountability Act, insurance companies would've to pay automatic interest [00:09:00] penalties of 20% paid to policy holders. When insurance companies delay making decisions or issuing payments, Eaton and Palisade wildfire survivors have learned that insurance companies do not have to deny a claim to devastate a family.

They only have to delay it. Deadlines are routinely evaded through open-ended reviews, partial decisions, and claims labeled indefinitely as under investigation. Although such delays already violate California state law, and I wanna make that clear, these are already illegal. There is no penalty. That lack of a financial consequence allows insurance companies to make this a routine business practice.

By imposing a 20% interest penalty on delayed payments, SB 8 78 will reduce the financial incentive for insurance companies to delay coverage decisions.

Delayed tactics are a classic strategy employed by insurance [00:10:00] companies, something that goes beyond wildfires, and that has been documented in many natural disasters across the country and companies secretly reducing cleanup estimate goes beyond just Ana Val Verde. It's part of how they run their business.

But there's an opportunity to act now together so survivors can be made whole, and that we don't run into these problems again in the future. If you wanna know more, go to fix insurance.org to sign on and support these bills.

Smoke and Mirrors is reported and produced by Justin Klasko, engineering and Sound Design by John Ennis. Our editor is Carmen Baller. And our executive producer is Jamie Court.