PAGE 6 Wildfires Continued Insights for Your Industry E06-1026 PROTECTING YOUR PROPERTY In the most commonly used standard provision, “additional living expenses” are described as follows: any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living (emphases added)6 “Necessary increase” refers to the fact that only essential expenses above an insured’s normal level of living expenses are covered, but that the standard for what constitutes a “necessary” expenditure depends on one’s normal standard of living, and not merely on what it would take to survive while the insured dwelling is uninhabitable. So, when it comes to “necessary increases” in expenses to maintain a “normal standard of living,” what’s covered and what’s not covered? California law requires that an insurer provide a policyholder, upon request, with a list of items covered as additional living expenses.7 While it is presumed that the coverage will extend to additional costs for basic shelter and sustenance (otherwise the coverage would be illusory), there are no specific requirements for what must be covered, or how to establish an insured’s “normal standard of living.” Given that, a homeowner would be well-advised to know ahead of time what types of costs might be compensable or not. Examples of expenses that might need clarification include: • The additional cost of rental vehicles for urban homeowners who don’t own a vehicle, but are forced to live temporarily in a location without access to public transportation; • The additional cost of boarding pets for homeowners forced to live temporarily in a location that does not allow pets; • Additional costs for accommodating people with special needs when forced to abandon a dwelling specially equipped for them; and • Additional costs for tuition or participation fees when individuals are forced to live temporarily away from the community where they attend school or participate in athletic or cultural activities. In each of these cases under standard policy language, the insurer would have the burden of demonstrating that the expense claimed was not covered under the policy. Insurers can resist paying certain claims and drag out the process of loss settlement, however, creating more pressure on policyholders to settle quickly. Value of Contents Homeowner insurers commonly establish the amount of insurance provided for household personal property (or “contents”) as a percentage of the dwelling property limit, even if it is expressed as a dollar amount. That limit can easily be too low to compensate for the loss of all of one’s clothes, appliances, and furnishings. That’s especially the 877.482.1234 | aiblc.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2022 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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