Sonoma COunty Fires Insurance coverage and information
November 15, 2017
As many homeowners in Northern California are now finding out, navigating the maze of insurance is a daunting task. The recent wildfires that swept through our area have caused enormous loss. Insureds are now trying to get full value for their dwellings and their personal property.
Terms such as actual cash value and replacement cost are now foremost on the minds of many people in Sonoma County. In the case of a personal-property claim, actual-cash-value is calculated by determining the replacement cost of the item and then subtracting depreciation (actual-cash-value = replacement-cost-value – depreciation). In determining the amount of depreciation in a personal property claim the calculation should be based on physical depreciation, not the age of the item.
Insurance companies are required to comply with the provisions of California Insurance Code, and its regulations, in determining actual-cash-value. Insurance Code section 2051 provides that when a policy under which value is not agreed upon up front but instead determined after a loss “requires payment for actual-cash-value” for a home’s contents, the measure of the actual-cash-value recovery is “the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation based upon its condition at the time of the injury or the policy limit, whichever is less.”
Accordingly, section 2051 permits insurers to make a “fair and reasonable” deduction for “physical depreciation” based on the actual “condition” of the item “at the time of the loss.” Physical depreciation refers to the physical wearing out of property; it is a measure of actual wear and tear. California Insurance Code section 2051’s limitation of “depreciation” to physical depreciation is consistent with longstanding insurance law throughout the country recognizing that depreciation for actual-cash-value purposes is limited to physical depreciation (wear and tear), and does not include other concepts of depreciation that might be used for tax or accounting purposes.
To protect California insureds from arbitrary or improper deductions for depreciation, the California Code of Regulations, states that “[w]hen the amount claimed is adjusted for betterment, depreciation or salvage, all justification for the adjustment shall be contained in the claim file . . . The basis for the adjustment shall be fully explained to the claimant in writing.”
This almost never happens. In fact, it is our experience that insurance companies routinely violate this section as claim files never contain any justifications for the reason a certain percentage of depreciation is applied to each item claimed. Insurance companies usually classify everything ‘average’. The computer program (often called a ‘Depreciation Guide’) used by the insurance industry calculate a depreciation percentage based on age and type of item rather than the physical condition of the item. Thus the physical condition at the time of the loss is completely ignored, contrary to law.
Adams Fietz is assisting homeowners maximize their insurance payouts with the assistance of retired adjusters. This is a free service to our clients. It is in the interest of our clients that the insurance companies maximize their payouts to people who faithfully paid their premiums.
Founding partners Ben Adams and Jeremy Fietz have been featured in over 100 radio and television interviews including: