October being fire season in Southern California, The Daily Transcript checked in with insurance professionals to see what changes had come about following last year's wildfires.
More stringent preventive measures were a given, but a new service protects and saves residential properties that lie within a certain distance of a spreading fire.
AIG Inc. was the first insurance carrier to offer wildfire protection services, which the company began to do in 2005. Following the blazes of 2007, Chubb Group of Insurance Companies and Fireman's Fund have also begun offering this crucial service. Farmers Insurance is implementing wildfire protection service for this fire season.
Once homeowners sign a form, the complimentary service allows the carrier to enter the premises if a fire comes within 3 miles of the property. It is offered only in the residential policy market.
They will do whatever is necessary to protect the property, including turning on sprinklers, removing combustibles and, as a last resort, applying a fire-resistant therma-gel to the structure. The service is usually contracted out to companies comprised of smokejumpers and former firefighters.
"The neatest thing that has come out of all the losses of last year is the wildfire protection services. Every client who has a homeowner's policy with us is eligible for it and it is complimentary," said Tim Dadik, California state manager for the Personal Insurance Division at Chubb.
Chubb offers the service in 13 states and has 50 trucks outfitted for this purpose and more than 100 firefighters. "We have mobilized them several times and saved properties," Dadik said.
There is a misconception that this service is offered at a premium only to high net worth individuals.
"Chubb and AIG probably write a preponderance of policies in expensive neighborhoods, but that does not mean they only extend this service to high net worth individuals. Typically, these underwriters cover homes for which the replacement value is at least $500,000 or $750,000, (depending on the carrier)," said Rob Cohen, the president of Benchmark Commercial Insurance Services Inc. in Encinitas.
The policyholder pays more for comprehensive coverage and these carriers extend broader coverage than an average policy, but do not charge for this new service, according to Cohen.
Part of the process involves meeting with the client and doing a walkthrough of the property and pointing out potential hazards, Dadik said.
Preventive measures being advocated both in the residential and commercial markets include managing the vegetation and clearing areas within 150 feet of the structure, removing combustibles and using non-combustible materials in landscaping.
For homeowners, Chubb encourages removing patio furniture, which no one thinks of as a hazard, Dadik said. Using fire resistant building materials such as tile roofs and stucco and reducing the potential for embers by enclosing decks are other measures being advocated.
When it comes to brush exposure, carriers are spending more time examining the location, using Google Earth's satellite images to see if brush exists in a building's vicinity, Cohen explained.
"If a structure is isolated or surrounded by brush, then they notify the agent if their underwriting guidelines prevent them from giving coverage. Or they bind the coverage, stipulating that the insured clear the brush within 30 days of the start date and then conduct an on-site inspection," Cohen said.
Properties in more fire prone areas, such as Julian or parts of Jamul and Ramona, are put in higher fire protection classes. In these areas brush must be cleared within 500 or 1,000 feet of the property, depending on the carrier.
"For such areas, we have to go to carriers that write higher risk policies. These are referred to as excess and surplus lines carriers," said Marc Kaplan, president of Aspen Insurance Brokers in El Cajon.
When it comes to eligibility for claims such as loss of business, a lot depends on the location of the business and whether it was in a mandatory evacuation zone.
Cohen had a client in La Jolla, a day spa that closed down for five days, because it had a "no travel" mandate, which required the public to stay indoors. But when the company tried to file a business interruption claim, it was denied, since it was not in a mandatory evacuation zone.
Similarly, another client in Escondido also tried to file a claim because many of its employees could not go to work.
"The carriers have to draw a line at what they are going to cover and what they won't. They surmised that if you were not in a mandatory zone, they would not cover such claims," Cohen said.
Nagappan is a San Diego-based freelance business writer.