A string of 52 arson fires that rocked southern California in December, destroying the parked cars that were initially set ablaze, scorching buildings and causing about $3 million in damages, may have put residents on edge, but paying for their damages shouldn’t be one of their worries, provided they have the correct insurance coverage.
Nor should they worry about a recurrence. A spokesman for the California Department of Insurance says he doesn’t see this as a trend, although firefighters in the state’s northern Marin County fought more than 50 fires set in trash cans and fields a few weeks later.
Chris Hackett, director of personal lines for Property Casualty Insurers of America, says insurers won’t pay for loss due to fire if it’s been determined to be an intentional act of fraud by the policyholders. In the case of the California car fires, a German national has been arrested and the fires have been ruled an act of arson.
Hackett says when a stranger causes a car to catch fire, the owner’s auto insurance will cover the damages, provided the owner has comprehensive coverage. If the blaze extended to the carport and the home itself, a standard homeowners insurance policy would cover the cost of damages, he says.
Hackett says the deductible would apply and a victim’s premium could increase as a result of the payout. He adds homeowners should be aware if their policy provides for replacement cost of any items destroyed in the fire, or for the actual cash value of those items, which would probably be for a lesser amount.
Hackett says it would be up to the insurance company to try to recover any money from the arsonist.
“That is assuming they are caught and convicted. Even then, the arsonist may not have the financial means to cover the losses,” Hackett says.
While a mayor of one of the affected towns called the string of arsons “a new form of domestic terrorism” in one news report and some policies have a terrorism exclusion, Mark Humphreys, an insurance attorney in the Dallas-Fort Worth, Texas, area says he doesn’t believe insurers would be successful with this defense in court.
Humphreys says a bigger problem for homeowners is if their insurance company believes they started the fire to their own home, or had someone do it for them.
“Fraud costs the insurance industry a significant amount of money every year,” says Hackett, who adds insurers have special units to investigate possible fraud. Fire departments also have arson investigation units.
Humphreys says if arson is suspected, an insurer will obtain all your phone records before and after the fire, look at bankruptcies, bank accounts, your job, and talk to neighbors in an effort to prove its case.
“But the insurance company has to prove it was arson by the policyholder, which is not always an easy thing to do,” he adds.
In one case, a spouse was suspected of setting his house on fire. Although he was acquitted of the crime, the insurance company continued to deny the wife’s claim, saying the house was community property. The insurer later agreed to pay the wife half the amount of the policy plus interest, based on Texas common law.
In another instance, an insurance company refused to pay a claim when a couple’s house caught fire after leaving to take their children to an aunt’s home for the summer. The insurance company labeled the incident suspicious because the couple had filed a theft claim earlier. The jury ruled in favor of the couple, saying the theft claim was proven legitimate and the insurer did not take into account that there was another reasonable suspect.
