Recently, Eli Flesch of Law360 highlighted a pressing issue faced by homeowners and businesses in Colorado – the underinsurance problem in the wake of the catastrophic 2021 Marshall Fire. This article explores the various legal, economic, and social aspects that have given rise to an underinsurance crisis, which has left policyholders vulnerable to the financial devastation of wildfires.
Despite the insurance industry’s efforts, policyholders claim they are consistently shortchanged on damage claims. Complaints range from unjust delays in the claims process to improper inspections that fail to consider the true extent or cost of fire damage. Additional smoke damage, often overlooked, has become a recurring theme in lawsuits against insurance carriers.
The Marshall Fire, which occurred in December 2021, resulted in property losses estimated at $1 billion. In the face of this enormous financial burden, insurance companies like State Farm have decided to stop selling new property and casualty policies in high-risk areas, such as California. This decision could lead other insurance companies to follow suit, reducing competition and leaving property owners with fewer options for coverage.
The underinsurance problem stems from a variety of factors, according to experts. High construction costs, insurers’ methods for calculating policy limits, and the types and costs of policies carriers sell all contribute to the issue.
In the article, LSW lawyer Susan Minamizono gives voice to the policyholders she represents in Marshall Fire suits highlighting that many homeowners who thought they had adequate coverage were still left underinsured after the fire. Her comments underscore the grim reality that even the most prepared homeowners face daunting underinsurance issues.
In response to this crisis, Colorado legislators have approved bills aimed at easing the underinsurance issue. Measures include creating an insurer of last resort and increasing coverage limits for certain types of policies. Despite these efforts, the new bills were diluted in the legislative process, leaving many to wonder if they will be enough to truly address the problem.
This article from Law360 points to a growing underinsurance crisis in Colorado and possibly across the U.S. In the face of climate change and increasing wildfire risks, the question remains: are we doing enough to protect homeowners from the financial devastation of these disasters?
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