Still standing: Mission Canyon resident Howard Schiffer surveys the remaining guts of his family's home on Orange Grove Avenue. Just approved for the rebuilding process by the county, the Schiffers are being forced to build their new home at less than three-quarters the size of their old home despite receiving their full insurance payout.
Paperwork, Pain, and the Long Road Back
The Ins and Outs of the Post-Wildfire Insurance Tango
Thursday, December 10, 2009
In the past 13 months, the foothills above Santa Barbara and Montecito have seen two ferocious fires tear through their countryside. Ravaging storied neighborhoods such as Mountain Drive, Coyote Road, and San Roque Canyon, the Tea and Jesusita fires carved out a path of destruction that left nearly 300 houses completely destroyed, and many more badly damaged. Today, hundreds of families are struggling along the harsh road of rebuilding, few armed with little more than the hope that their homeÂ-owners insurance policy will be enough to get them home.
Certainly there were even more unfortunate homeowners and renters who had no insurance-their fates a world of tragic hardship-but this is a story about the majority of the Tea and Jesusita victims; people who crossed their t’s and dotted their i’s on homeowners insurance policies from established companies, including Allstate, Liberty Mutual, State Farm, and California’s ubiquitous FAIR (Fair Access to Insurance Requirements) Plan program. They paid their premiums faithfully, in some cases for more than 40 years, and considered themselves protected should the worst-case scenario ever arrive. Now, standing in the ashes of their lives, they are realizing just how wrong they were. This is the story of their hard lessons learned.
Take a ride through the scorched hillsides of Mountain Drive today, and you’ll think you are witnessing a resurrection. Vibrant green chaparral now grow in the ashes, and signs from architectural firms, building contractors, and landscaping firms dot the scenery. All day long, you hear the sound of power tools and backhoes. But don’t let all this activity fool you; the road to recovery has been anything but easy, and, for most, it is anything but over. “You pay your bills and trust your policy is enough, but unfortunately, it takes a disaster to educate yourself about what your needs really are,” said Linda Harlin, who has lived on Coyote Road for 23 years. Despite a hard, unrelenting effort, her family is still in the earliest stage of rebuilding their home, a year after it was destroyed in the Tea Fire.
The Eastern Flank
“Basically, people are facing one of two problems,” explained Amy Bach, executive director of United Policyholders, a statewide advocacy organization that helps disaster victims navigate the insurance gauntlet. “You are either underinsured, as in, even if you get paid your full coverage, it won’t be enough,” she said, “or, the insurance company is lowballing you : that is, they aren’t offering you enough of your coverage.” Since hitting the ground here in Santa Barbara immediately after the Tea Fire, her group has found plenty of both problems, particularly in the Mountain Drive area.
Out of the rubble: Longtime Mountain Drive resident Kathy Neely assesses the situation at her family home in the days after November 2008’s Tea Fire. In the 13 months since, the family has wrestled with an exhaustive insurance claim process only to learn that they-despite having maxed out their homeowners policy in the months before the fire struck-were underinsured.
If ever there was a quintessential Mountain Drive home, it was the Neely clan’s handmade masterpiece in the lower Hyde Tract. A whimsical adobe built by the late Bill Neely, one of the original homesteaders of Mountain Drive’s artistic community, the house-which had survived the Coyote and Sycamore fires years ago-was burned to the ground in the Tea Fire. For decades, the Neely family bought insurance through the California FAIR Plan, a basic coverage program underwritten by an association of insurance companies specifically for properties in areas where most individual companies dared not tread. The Neelys, however, discovered that-despite updating their policy frequently to the maximum house value permitted under the FAIR Plan-they won’t be getting enough money to cover the varied costs of rebuilding. “It has been a mixed bag of good and bad,” said Bill’s son, Chris Neely, with a weariness in his voice that suggested more of the latter. “As it ends up, we are underinsured.” The problem the Neelys face is almost universal for victims of the Tea and Jesusita fires: The amount of money the insurance companies figured would be needed to rebuild a home is nowhere near the real cost. The common industry standard for most policies offers $100-$200 per square foot, which is, at best, half the amount of what it costs today to rebuild a home as it once was.
By Paul Wellman
Then and now: Kathy Neely and her son, Ryan, hold a tile made decades ago by Ryan’s grandfather, Bill Neely, to commemorate the home’s survival of the Coyote Fire; although the house did not fare as well, the tile endured the Tea Fire.
For folks on the FAIR Plan, there is the additional problem that all payments come in one lump sum, which must cover everything, including paying the contractors, architects, and engineers; permit and cleanup fees; landscaping, etc.; as well as all lost personal items. Further, you don’t actually get this money until you have the building permits in place (the check usually goes to your mortgage company to be held until needed). For the Neelys, and for many like them who had older homes built before the current, stricter codes were on the books, this can be a brutal catch-22. The Neelys need their insurance money to grade and widen their driveway before the county will issue building permits, but alas, the money won’t come through until they actually have the permits. “We are not being allowed to rebuild, and basically not being able to afford to rebuild,” Chris said. According to Bach, the average underinsured person who loses his/her home in a wildfire ends up being short anywhere from $100,000 to $500,000, with the bulk of folks right around $200,000. “I’d say what we are seeing in Santa Barbara [after these fires] is, unfortunately, pretty typical,” said Bach.
Not far from the Neelys, Trace Robinson, a landscape contractor, is struggling through both the “underinsured” and “lowballing” scenarios. “I hope nobody is having a worse experience than we are,” she said, laughing lightly. Insured by Allstate, Robinson painted a picture of trials and tribulations with her insurance company and adjusters that has her actively looking for a lawyer.
Insured with “good coverage, but certainly not the maximum,” Robinson’s downstairs and garage suffered total loss from smoke damage, and her guest house, where her daughter, Minka, was living with her fiancee-a bungalow designed by Minka’s grandfather, the legendary architect Frank Robinson-was burned to the ground. A perfect storm of troubles has followed, including inadequate square-footage rebuild money; the daunting process of documenting lost possessions, how much each item cost, and then debating with Allstate about how much each item was worth at the time it went up in flames; disputing what she was owed on the “additional living expense” option that covered her family’s stay in a hotel immediately after the fire; and the financial and legal peril she finds herself in after paying out-of-pocket for numerous repairs and having Allstate “drag their feet” about reimbursing her. Robinson estimates she has thus far received just over $200,000 on a policy she had thought would pay her upward of $1.5 million.
By Paul Wellman
Suffering through similar trials and tribulations and then some, Trace Robinson and her family recently moved back into their not yet fully repaired Mountain Drive home after lack of payment from their insurance company saw them evicted from a rental house during the Thanksgiving holiday.
But the worst is that the insurance company is refusing to make any payment on the guest house, despite the fact that it was fully insured. In years past, the house had been a rental, and was covered via a wraparound plan-something that, for an additional premium, puts a structure under the homeowners’ insurance policy, despite the fact that it essentially is being used as a business (i.e., to generate income). According to Robinson, that changed in 2008 when the renters moved out and she decided to remodel the place. As a result, she changed her policy accordingly, dropped the wraparound coverage, and put it back on as a traditional “second structure.” This would have been fine except that in the months leading up to the Tea Fire, Robinson’s daughter and her fiance moved into the studio and, in an act that most future sons-in-law can relate to, the young man sent his future mother-in-law checks to help her cover family expenses. Saying that there was a “casual family lease,” Robinson explained the agreement more as the young couple’s contributing to their family property’s welfare than an actual rental situation. “I mean, come on, they are family,” Robinson said. Allstate, however, considered this payment to be a violation of the terms of the “second structure” policy, and, as a result, is refusing to pay. “I am already living on credit cards,” bemoaned Robinson, “and now I am looking at up to a million-dollar legal fight just to get the money they should have already paid me. It’s horrible.”
Members of the Neely and Robinson clans gather recently outside a trailer on the Neelys’ Mountain Drive property. Despite being underinsured and having no shortage of work both behind and ahead of them, the families remain committed to the rebuilding process.