On August 8, 2023, a deadly wildfire ripped through the island town of Lahaina, on the Hawaiian island of Maui. The fast-moving blaze, abetted by down power lines, left at least 114 people dead, and thousands of locals displaced and traumatized. Over 2,200 buildings, many with irreplaceable historical importance, were destroyed leaving this beautiful community shattered. As of this writing, the Lahaina wildfire of 2023 is the deadliest wildfire in the United States in over a century.
Rebuilding after a calamitous natural disaster like the Lahaina fire starts with understanding the terrain of such cases. Such was the topic of Amy Bach, Bob Bonaparte and Dylan Schaffer’s webinar, “Where There's Smoke, There's Fire: Wildfire Damage and Insurance Disputes”, now available as an on-demand CLE. Bach’s organization has been assisting wildfire survivors with insurance claims and recovery challenges for over 30 years, and both wildfire lawyers share their extensive experience trying bad faith cases on behalf of wildfire victims.
“Wildfire season” has become an expected interval between summer and fall; due to global climate change, we expect to see more wildfires—and more wildfire litigation—in the years to come. In preparation of this growing trend, here are ten important factors to consider when taking on a wildfire claim.
1. A majority of disaster victims are underinsured.
Underinsurance law remains favorable to insurers. United Policyholder surveys consistently find nearly 2/3 of wildfire-impacted households are underinsured. In bringing cases to resolution, and collecting information about the economic damages on property damage, (and any noneconomic damages in a claim against a third party that caused the fire) in a wildfire lawsuit, be sure to explore all avenues of insurance collection; this may include utility companies and government entities. Attorneys who are new to this case type may consider partnering with a law firm that specializes in wildfire cases.
2. Many wildfire survivors report mental health and emotional challenges.
Beyond the physical injuries that can apply in fire cases, smoke exposure or toxic exposure cases (due to failure of an insurer to properly repair a building damaged by smoke), wildfire survivors report feelings of tremendous loss. Trauma responses, including PTSD and Major Depressive Disorder, may present in your wildfire clients. While emotional distress is a category of damages that is recoverable, trauma may make your client appear “non-credible” to some judges and juries. It is important to vet your wildfire cases well, not just for collectible damages, but to ensure that the client gets appropriate counseling. Always consider this factor during your free consultation. Moreover, familiarize yourself with how to combat defenses of malingering or somatoform symptom disorder by reading Polarizing the Case, or watching the CLE Discrediting Psychological and Neuropsychological Defenses.
3. Wildfire recovery will depend on the state in which the loss occurred.
For this reason, we recommend filing a complaint with your state’s department of insurance, and have your client go on record when appropriate. Each state’s Fair Claims Settlement Practices Regulations will influence how much your wildfire client is able to recover. In Lahaina, Hawaii, the pertinent statutes can be found on United Policyholders’ Claim Guidance Library.
4. Recorded statements can work in your favor.
Many attorneys worry that recorded statements create a situation where their client may discredit their claim or create minor inconsistencies that insurers will use to improperly deny or defend their property loss claim. On the other hand, if the insurance company asks for an EUO (examination under oath), it allows you to shape the narrative. With a properly prepared witness, a recorded statement can straighten out the claim and get it on track for payment. Finally, make sure your client knows that they absolutely need to have an attorney present.
5. Never accept the property evaluation from the claims adjuster without getting a second opinion.
No matter how friendly or competent your client’s claims adjuster seems to be, always run the claim through independent adjusters, other attorneys, and investigative experts. There are a variety of things going with the evaluation that may be unclear if you do not normally work in property loss claims. One that stands out is the use of property claim software that insurers use to intentionally undervalue losses, repairs, or rebuilding. One of these is Xactimate (see more on this program below). If you are familiar with bodily injury programs like Colossus in the auto field, Xactimate is similarly used in homeowner claims to undervalue loss claims.
As with any claim, insurers will be looking out for their own financial resources. Overworked, undertrained adjusters may fail to thoroughly inspect attics and crawl spaces, behind drywall/insulation, or below carpet or flooring. More commonly, insurance claims adjusters will simply render opinions they’re not qualified to make. Depending on your state’s bad faith rules, you may need to focus on underpayment of structure estimates, which are often overlooked in initial settlement offers.)
Similarly, be wary of attempts to minimize claim payments by shifting coverage from the policyholder’s insurance policy to a government program. In other environmental catastrophic claims such as hurricanes, some insurers have buried alternative causation documents to shift the financial loss to taxpayers instead of paying the claims correctly under the person’s insurance policy. Consider this possibility in your cases if an insurer is trying to move their liability to a federal disaster policy where compensation may be far lower.
6. Insurance companies still use settlement software.
Even after a major class action case against them (Hensley v. Computer Sciences Corporation, Case No. 05-CV-4081 [W.D. Ark. Mar. 15, 2006]), many insurance companies still use computer software to intentionally undervalue property damage claims in first party cases. A program called Xactimate is particularly popular with insurance companies; this software was subject to its own class-action lawsuit in 2017. Increasingly, insurers are failing to consider architecture fees, project manager fees, engineering fees, when reaching their replacement cost estimates. Their initial settlement offers come directly from their software programs. Insurance companies continue to delay, deny and defend their version of the claim value. This has been the case in wildfires, hurricanes, and other property damage claims throughout the United States, and experts suspect it will be the case with the Maui wildfires as well.
7. An insurance company normally owes no duty to advise on coverage limits.
As explained in the on demand CLE "Where There's Smoke There's Fire: Wildfire Damage and Insurance Disputes", insurers and their sales representatives represent themselves as experts and they are the ones who set dwelling limits. Property owners may rely on their insurer or insurance agent to ensure that adequate dwelling coverage is in place, but this is not a requirement of their job. Tragically, it’s often not until after catastrophic loss that insureds are told otherwise. (See Shultz Steel Co. v. Hartford Acc. & Indem. Co. (1986) 187 Cal.App.3d 513, 524; Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927.)
8. Smoke claims differ from fire claims.
Residual smoke particles are often invisible to the naked eye, and smoke residue may remain long after the smoke dissipates. Whereas fire damage is visible, smoke damage may require secondary opinions and outside expertise. Some experts with decades of experience in fire damage claims believe that a smoke damage structure is uninhabitable due to the impact of the smoke particles on the structural materials of a building such as the wood, sheetrock, carpet, furniture and other contents. The list of health effects of living in a smoke damaged house can include respiratory illnesses, chronic illness, eye and skin irritation, compromised immunity, and cancer. The composition of the remaining items will depend upon its compositional makeup, and can affect the value of your client’s case value.
9. Many fire insurance claims have hidden damage.
If there is one factor that is consistent among wildfire claims, it’s that wildfire heat is erratic. Damage—and recovery—will depend on how quickly the fire is contained, as well as environmental factors like humidity, wind, and even soil and plant composition. Smoke, ash, and particulates may also affect the amount of recovery one can expect in a wildfire claim. Talk to an experienced wildfire attorney to learn more about how wildfire case damage is assessed.
10. The law is not prepared to deal with climate change.
For as quickly as the law is changing to accommodate wildfire cases, the climate is simply changing faster. Even the most competent attorneys may find wildfire cases challenging. As we brace for a changing world—both in and out of the courtroom—start sharing notes with other attorneys seeking to bring justice in similar cases. For example, seek out other policyholder attorneys who have clients who who’s claims are denied or improperly defended by the same insurance company; if they were able to get the insurance company to settle favorably for their client, take note of evidence and arguments used to get coverage and a full, fair and prompt payment for the client for the loss.