The first insurer to run out of money as a result of claims from the recent spate of California wildfires was recently declared insolvent by a California state court judge and taken over by California insurance regulators in early December according to an article from CNN. Merced Property & Casualty (Merced) was a small insurer that wrote homeowner’s policies and other types of insurance for consumers in California. According to a report from the Insurance Journal, the insurer had only $23 million in assets but faced more than $64 million in claims related solely to the Camp Fire in the town of Paradise alone when it was declared insolvent. As homeowners slowly return to their homes in Paradise and elsewhere across the state of California and begin the rebuilding process, this could lead to additional uncertainty for property owners who may have had insurance coverage through either Merced or other property insurers that could soon find themselves on the brink of insolvency once claims from the Woolsey Fire in Southern California and the Camp Fire in Northern California begin to be filed in earnest. However, what property owners who are covered by either Merced or other insurers that are reported to be on the brink of insolvency need to understand is that they still have rights to recovery for their covered property damage suffered as a result of a wildfire, but the deadline for making claims can be extremely short when an insurer is declared insolvent, so homeowners should seek a consultation with an experienced wildfire damage attorney as soon as possible.
Unlike when a company declares bankruptcy, insolvency means that there is no chance the insurer will continue to operate. As noted in a release on Merced’s website, state regulators now will resolve claims made by Merced policyholders at the time the insurer was declared insolvent by a California Superior Court judge. Property owners who had policies with Merced will not be left high and dry, however, simply because the insurer was declared insolvent. Now that the insurer has been declared insolvent, the California Insurance Guarantee Association (the Association) will step in and deal with the adjustment and payment of any claims which relate to either the Camp Fire or other wildfires from homeowners who were Merced policyholders that had been made at the time the insurer was declared insolvent. The Association is an agency created by state law to provide protection to policyholders and claimants in the event of a insurer's liquidation by taking over an insurer’s operations when the insurer is declared insolvent by a Superior Court judge.
Nevertheless, this is not altogether a positive development for Merced policyholders because there are certain time and benefit limits which apply when the Association takes over an insolvent insurer in California. To begin with, the amount paid when an insurer is declared insolvent is capped by state law at $500,000 per claim. Any amount remaining above this is paid if the Association is able to raise sufficient funds in the process of liquidating, or selling the assets, of the insolvent insurer. Therefore, there is the very real possibility that if a homeowner was insured by Merced and suffered a total loss of his or her home then it might not be covered in full given the limited assets that Merced had at the time it was declared insolvent. In addition, certain time periods apply in submitting claims when an insurer is declared insolvent under California law because all policies are cancelled effective 30 days after the insurer is declared insolvent as a matter of state law. Therefore, if you had a policy with Merced, you should make sure to file a claim as soon as possible to avoid the possibility your claim later may be barred because the insurer was declared insolvent.
The head of the California Insurance Guarantee Association has warned that increasing risk from wildfires in California could prompt insurers to raise premiums or decline to sell policies entirely to homes in high-risk areas. Going forward, this is a concern for California property owners who have yet to be affected by wildfires but, for those who have already been affected by a wildfire, is a very real and current concern. However, your homeowner's policy next year is likely the least of your problems. If you have suffered damage as a result of a wildfire now, then you need to know what your options are now given that the damage has already occurred. Therefore, if you have suffered damage of any kind as a result of a wildfire, then you should immediately seek a consultation with an experienced property damage attorney.
If you are a California homeowner or property owner who has suffered fire damage or other losses as a result of any of the state’s historic wildfires in the past several years, including either the Woolsey or Camp Fires, it is in your best interest to retain an experienced California property damage attorney as soon as possible to assist you every step in the way in what can be a long, burdensome and time consuming process. We understand that you may have many questions regarding damage caused by wildfire, what damage is and is not covered by homeowner’s insurance, and the insurance claim process, so our team provides you with a free consultation to go over all your options. We have helped thousands of homeowners with their insurance claims as a result of wildfires, including those who may have been covered by insurers that were declared insolvent like Merced. If your property has been damaged in a California wildfire, contact our firm immediately at firstname.lastname@example.org or (888) 529-3111.
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