Homeowners Insurance Valuation: What Agents and Brokers Need to Know

Transcription

1 Hmewners Insurance Valuatin: What Agents and Brkers Need t Knw A Three Hur Cntinuing Educatin Curse mderated by Kristi Dean STONE ROSENBLATT CHA Speakers: Karen Bever, Leslie Blzan, Mike Newfield and Gidn Vardi May 24, 2011, 8:30-12:00 p.m. Pasadena, Califrnia Prvider Curse Material Table f Cntents Syllabus 1 Califrnia Cde f Regulatins Insurance Cdes Curt Cases Desai v Farmers Ins. Exchange (1996) 47 Cal.App.4th Everett v State Farm (2008) 162 Cal.App.4th Fitzpatrick v Hayes (1997) 57 Cal.App.4th Free v Republic (1992) 8 Cal.App.4th Jnes v Grewe (1987) 189 Cal.App Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha

2 Miscellaneus NAHB/Bank f America Study f Life Expectancy Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 2

3 SYLLABUS I. INTRODUCTION A. The Catalysts fr Cncerns ver Underinsurance 1. Prtectin fr the largest investment made by mst hmewners 2. Prtectin fr mrtgagrs 3. The impact f recent catastrphes B. AB 2022, cdified int Califrnia Cde f Regulatins sectins , , , , , and amended and Revisin f Residential Prperty Disclsure Frm 2. Residential Prperty Insurance Bill f Rights 3. Mandatry training fr agents/brkers 4. Understanding, enlightenment and dcumentatin regarding replacement cst estimates II. RESPONSIBILITIES OF AGENTS AND INSURERS BEFORE AB 2022 A. The General Rule 1. Fitzpatrick v. Hayes B. The Exceptins t the General Rule 1. Jnes v. Grewe 2. Free v. Republic 3. Desai v. Farmers 4. Everett v. State Farm III. DIFFERENCES BETWEEN HOMEOWNERS' AND DWELLING PROPERTY POLICIES A. Dwelling Cverage 1. Cnsidered a residential prperty f up t fur units, whether ccupied by the insured r nt Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 1

4 2. Used mre frequently fr landlrd (tenant) prperties and hmes that dn t qualify fr standard r preferred hmewners plicies, e.g., lder hmes, thse with a market value belw replacement cst, dwellings under cnstructin, vacatin hmes, rentals, permanent mbile hmes, ffices, studis, studi facilities B. Hmewner's plicy (HO plicy) 1. Owner-ccupied 2. Max f tw family units 3. Inspectins fr heating, plumbing, electrical systems and cnditin 4. Owner has t be checked fr prir claims 5. Residential prperty, nt used fr cmmercial prperties C. Differences in the prperty that may necessitate differences in cverage r cverage levels 1. Cnditin is pr 2. Age f hme may require rebuild 3. Permits were nt pulled fr remdels 4. Vacant prperty 5. Rental prperty 6. Up t five rmers r barders ccupy prperty 7. Insured nly requires dwelling cverage IV. BASIC CONCEPTS OF PROPERTY VALUATIONS A. Lss Settlement Prvisins 1. What they lk like 2. Hw they apply Determines whether insured gets full replacement cst fr the lss. If the amunt is cverage is prperly determined, insured gets the full replacement cst up t plicy limits. If the cst is insufficient, the plicy will typically prvide that the insured will get a prprtin f the replacement cst, r the actual cash value, whichever is greater. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 2

5 Unlike cmmercial cinsurance, the HO plicy has n penalty. If adequately insured, the hmewner will always get at a minimum, the full actual cash value, and at a maximum, the full replacement cst. B. Actual Cash Value ( ACV ) v. Replacement Cst Value ( RCV ) 1. Actual Cash Value requires a reductin because f depreciatin. Depreciatin is the lss in value f a piece f prperty ver time. 2. Replacement cst fr the dwelling imprvements vs. cntents f hme 3. Califrnia Insurance Cde ( CIC ) 2051, and Different Types f Structure 5. Califrnia Residential Prperty Disclsure July 1: new disclsure frm Attentin t descriptin f actual cash value v. guaranteed replacement cst Remval f prvisin regarding insuring dwelling t full replacement cst 6. Califrnia Residential Prperty Insurance Bill f Rights Must accmpany new disclsure effective July 1 Eliminates first 16 lines f the current disclsure frm C. Depreciatin (Hldback) fr Claims and Hw it is Applied under a Hmewners' Insurance Plicy (CIC ) 1. Market Value a. Nt used as a lss valuatin methd: market value fluctuates by t many tangibles b. Different structures may be valued the same via market value, but may require different replacement csts, such as csts t recreate antique cnstructin techniques 2. Replacement cst less depreciatin fr age, wear and tear D. Effect f Underinsurance n Settlement 1. Examples Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 3

6 V. NECESSARY COMPONENTS OF A DWELLING STRUCTURE TO ESTIMATE REPLACEMENT COST A. Shape f Outside Perimeter 1. Cmplex = expensive t rebuild B. Type f Fundatins 1. Slab n Grade 2. Pier and Beam 3. Basement r T-Shaped C. Type f Frame 1. Mdern Light Frame Cnstructin Wd irn-clad Stucc n wd r plaster n cmbustible supprts Aluminum r plastic siding ver frame 2. Platfrm Framing 3. Balln Framing 4. Pst and Beam D. Rfing Material and Type f Rf 1. Cncrete Tile 2. Steel r Metal 3. Flat Rf 4. Slate Rf 5. Green Rfs 6. Slar Rfs E. Siding Materials and Type f Siding 1. Stucc 2. Wd Clapbard Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 4

7 3. Cedar Shingle 4. Cmpsite Wd 5. Seamless Steel 6. Aluminum Siding 7. Vinyl Siding 8. Vinyl Catings 9. Brick Veneer 10. Stne Veneer 11. Fiber Cement F. Lcatin f Prperty being Built 1. Husing Tracts v. Custm Hmes 2. City, suburban, rural 3. Restricted cmmunity develpments 4. Differ by state, cunties G. Whether the Structure is Lcated n a Slpe 1. Access restricted? 2. Cases fr sharing H. Building Cde Upgrades 1. Older hmes require additinal upgrades t meet current building cdes. 2. Insurers must ffer law and rdinance cverage, absent a written refusal 3. Retrfit f structures I. Size f the Entire Structure and Square Ftage J. Appurtenant Structures Cverage and Values 1. Balcnies 2. Attic Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 5

8 3. Garage Attached garage (i) (ii) Direct cntact between frame and dwelling Usage, functin, build-ut and finish Detached garage (i) (ii) (iii) Accessry r appurtenant structure Usage, functin, build-ut and finish Utility hk-ups, electrical and plumbing 4. Other buildings? Occupied r rentals? 5. Fencing, masnry, landscaping, pls, decratin K. Number f Stries and Nnstandard Interir Wall Heights 1. Lw rise 2. Mid rise 3. High rise 4. Split levels 5. Subterranean L. Materials, Types f Interir Features and Finishes 1. Heating and air cnditining system (furnaces, central r individual units, electrical wallbard heaters? Electric wall heaters?) 2. Walls (mirrrs)? 3. Flring (carpeting, wd flrs) 4. Ceiling 5. Fireplaces Zer clearance? Frced air blwers? Upstairs and dwnstairs? Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 6

9 6. Kitchen and baths (cuntertps, plumbing, fixtures, cabinets, appliances) 7. Sil cnditin: sand, rcky r clay? 8. Garage drs M. Additinal Csts: 1. Cst f demlitin and debris remval 2. Architect's plans, engineering reprts, and permits 3. Age f the structure r the year built 4. Csts assciated with custm hmes VI. EFFECTS OF CATASTROPHIC EVENTS ON REPLACEMENT COST A. Cnstructin Labr, Building Supply, Fuel and Transprtatin Shrtages 1. Catastrphic events verwhelm systems, including the amunt f available skilled and unskilled labr 2. Cst f materials are affected by diminished prductin, demand, and distance frm which gds and services must be brught t the affected areas 3. Cst f cnstructin impacted by transprtatin delays due t damage t infrastructure 4. Building Cde inspectins affected by shrt staffing, untrained supprt 5. Debris remval can be extensive 6. Fuel shrtages raising prductin and delivery csts, disrupting prductin and delivery f gds and creating the inability t use pwer tls r generatrs. B. Demand Surge 1. Increased csts and rebuilding delays 2. Replacement cst estimates must nt include a cst assciated with demand surge. 3. Agents must infrm applicants and plicyhlders that this cst has nt been, and cannt be taken int accunt. (CCR ) 4. Agents can apprise custmers that additinal cverage may be btained. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 7

10 VII. ENHANCEMENTS AND ENDORSEMENTS TO THE HOMEOWNERS/DWELLING POLICY AND IDENTIFICATION OF COVERAGES THAT HELP PROTECT AGAINST UNDERINSURANCE A. HO Plicy Overview 1. The belw differences apply nly t prperty and cntents cverage; liability is the same. 2. The Standard Five Brad Frm (HO 02): This frm prvides brad frm r named perils cverage fr bth the dwelling and persnal cntents; Special Frm (HO 03): This frm prvides special frm r pen perils cverage which insures all risk except fr named exclusins n the dwelling and structures, and named peril cverage fr persnal prperty; Tenants Frm (HO 04): This frm prvides brad frm r named peril cverage fr tenants and renters; n cverage fr the dwelling; Cmprehensive Frm (HO 05): This frm prvides special frm r pen perils cverage which insures all risk cverage except fr named exclusins n the dwelling, persnal prperty, and ther structures; Unit Owners Frm (HO 06): This frm prvides brad frm r named peril cverage fr cndminium wners; 3. The Nt-S-Standard Frm Mdified Frm (HO 08): This frm prvides ACV mdified peril cverage fr wner ccupied dwellings which are nt suitable fr standard frms; they are typically risks which are lder r higher risk. This is the nly cverage in which bth buildings and cntents are prtected against named perils with extended cverage perils and vandalism and malicius mischief cverage. 4. The Five Classificatins f Cverage Cverage A - Dwelling: Value f dwelling, nt land; typically has cinsurance clause that as lng as the dwelling is insured t 80% f actual value, lsses will be adjusted at replacement cst, up t plicy limits; Cverage B - Other Structures: Cverage C - Persnal Prperty: Reflects sublimits fr theft, lss f particular classes f items; Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 8

11 Cverage D - Lss f Use/ALE: limits vary; shuld prvide fr any necessary increases in living expenses s that the husehld can maintain its standard f living, including mving expenses. It may als prvide cverage fr strage, cleaning, eating ut, transprtatin csts, barding care fr animals. Might als prvide fair rental value minus expenses. Additinal Cverages: Vary by frm, but can include reimbursement fr reasnable repairs, tree and tree remval, credit card r identity theft, and cllapse. 5. Exclusins: In a special frm r pen perils plicy, specific exclusins will be stated in an exclusins sectin. Exclusins vary by frm. B. Review f Significant Prperty Enhancements and Endrsements t the Plicy 1. Schedule Prperty Endrsements (agreed value) 2. Persnal Prperty Replacement Cst (the least f the fllwing: repair, replacement, r limits) 3. Persnal Injury 4. Hme Business Endrsement C. Catastrphe Cverages 1. Earthquake 2. Fld 3. Hurricane/Trnad 4. Mld 5. Subsidence/Landslide 6. Catastrphe effects n rebuilding csts. High demand fr labr, resulting in shrtages and increased labr High demand fr building materials, resulting in shrtages and increased materials csts. Inability t btain supplies and materials due t breakdwn f delivery methds, fuel shrtages, blcked access. Shrtages f all types resulting in delays and increased csts. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 9

12 Permit restrictins may dictate ability, methd, cst and time t rebuild, causing delays and increased csts. Delays result in ptential fr increased csts due t inflatin, shrtages, and mre man-hurs cnsumed. D. Types f Replacement Cst Cverage (CIC 10102) 1. Basic Replacement Cst Cverage Intended t prvide fr cst t repair r replace the dwelling withut a deductin fr physical depreciatin. Mst plicies pay nly ACV until the repairs have begun r are cmpleted Maximum amunt limits specified in the plicies 2. Extended Replacement Cst Cverage Extends the cverage abve the dwelling limits up t a stated percentage r specified dllar amunt (plicy limit) Extended Replacement Cst is typically a percentage abve the plicy limits, usually % Subject t deductible and frequent requirement f actual repair r replacement t recver the extended csts. 3. Guaranteed Replacement Cst with Full Building Cde Upgrades Cvers the full cst t repair regardless f the limits shwn n the plicy declaratin Bradest frm f cverage available. 4. Guaranteed Replacement Cst with Limited r N Building Cde Upgrades 5. Exclusins Beware f limitatins r exclusins fr cst f remval f debris and demlishing the remaining building May nt include allwance fr architectural r engineering fees May nt include permits Mrtgage payments while repairs are cmpleted Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 10

13 General cntractr s verhead and prfit 6. Misuses: The failure t insure the full value f the risk and relying n the "replacement cst" endrsement t make up the difference is inapprpriate and harms the plicyhlder. Examples E. Building Ordinance Cverage Requirements 1. What is included and excluded in Building Cde Upgrade (Ordinance and Law) Cverage (CIC 10102) Residential Prperty Insurance Disclsure Statement details as required by CIC Identificatin f cverages purchased Disclsure every ther year upn renewal Guaranteed replacement cst fr dwellings nly if withut limit r sub-limit Applicability t building cdes, rdinances, standards r laws nly if nt impsing stricter standards n the prperty based upn level f insurance When disclsure required t mrtgagr. 2. The varius types and levels f replacement cst (CIC 10102) 3. Ordinances particular t specific lcatins and risks 4. Awareness f limits and sub-limits F. Appurtenant Structures 1. What is included? 2. What is excluded? VIII. BASIC FIRE POLICIES A. Real Prperty Frms 1. CIC 2070 requires that the frm be standard, r substantially equivalent r mre favrable t the insured than the standard frm insurance plicy. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 11

14 2. Basic frmat: Brad Frm vs. Special Frm Cmprehensive Frm vs. Mdified Cverage Frm Plicy Declaratins Plicy Agreement (Insuring Clause) Cnditins: things r issues that will suspend r restrict cverage, insureds bligatins, such as reprting additinal hazards, mitigating lsses, reprting claims Cst Plicy Exclusins Plicy Endrsements fr Catastrphe Plicy Endrsements fr Valuatin and Limits Plicy Endrsements fr Building Ordinance Plicy Endrsements fr Appurtenant Structures Plicy Endrsements fr Extended r Guaranteed Replacement B. Differences between ACV and RCV 1. Measure f ACV is determined as fllws: If ttal lss, plicy limit r fair market value f the structure, whichever is less; If partial lss t structure r cntents, the amunt it wuld cst the insured t repair, rebuild r replace the thing list r injured, less a fair and reasnable deductin fr physical depreciatin based upn its cnditin at the time f the injury r the plicy limit, whichever is less. Deductin fr physical depreciatin shall apply nly t cmpnents f a structure that are nrmally subject t repair and replacement during the useful life f that structure. (CIC 2051) 2. In a special frm that requires RCV: The measure f indemnity is the amunt that it will cst the insured t repair, rebuild r replace withut a deductin fr physical depreciatin, r the plicy limit, whichever is less. If the plicy requires the insured t repair r replace the damaged prperty in rder t cllect the full replacement cst, the insurer shall pay Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 12

15 the ACV until the damaged prperty is repaired r replaced. Then the insurer shall pay the difference between the ACV payment and the full replacement cst reasnably paid t replace the damaged prperty, up t the limits Insureds have 12 mnths t cllect the full replacement cst; additinal six mnths fr gd cause. C. Exclusins and Limitatins f Cverage 1. Building Certain cmpnents excluded such as fundatins and levels belw fundatin Appurtenant structures unless listed in cverage extensin Undergrund structures r equipment utside the fundatin walls Irrigatin and water reclamatin systems 2. Decrative r artistic cmpnents withut utilitarian purpse 3. All Risk v. Named Peril 4. Typical endrsements fr pllutin, mld, asbests, war, nuclear D. Extensins f Cverage fr Items Otherwise Excluded 1. Other structures such as patis, fences, awnings and appurtenant structures 2. Nn-dwelling prperty such as landscaping, fencing, antennas and satellite dishes 3. Equipment and utility service structures 4. Walkways, driveways 5. Bulkheads, piers, retaining walls 6. Pls, spas, etc. E. Review f the Califrnia Standard Frm Fire Plicy (CIC 2071) 1. Cntents and language mandated by CIC Required cverages fr specific perils Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 13

16 3. Required exclusins/perils nt included F. Review f the FAIR Plan Cverages (CIC 10090) 1. Cverage available t insureds subjected t hazards beynd their cntrl, in specially designated area state When insurance nt available thrugh nrmal channels Cverage thrugh assciatin f insurers writing business in the 2. Standard plicy fr structure and cntents Insures fire, lighting, internal explsin can be added Extended cverage is ptinal: ther structures, additinal living expenses, rdinance r law, debris remval, landscaping 3. Fire and earthquake cverage available, but with restricted limits 4. May have larger than average c-insurance G. Review f Earthquake Insurance Cverages (CIC et seq) including cverage ffered by the Califrnia Earthquake Authrity ( CEA ) 1. EQ cverage ffer required f carriers selling hmewners insurance in Califrnia r thrugh Califrnia Earthquake Authrity participatin 2. Cverages ffered Basic earthquake plicy-hmewners, replacement cst Basic earthquake plicy-renters (n/a) Basic earthquake plicy-cmmn interest develpment (fr apartments, cnds and similar shared wnership entities) Minimum 5%, up t 15% deductible. 3. Cnditined upn valid, existing fire insurance plicy 4. Exclusins a. N cverage fr earthquake related fld r tsunami b. nn-utilitarian artwrk and decratins c. nn-attached appurtenant structures Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 14

17 d. Exclusins fr nn-dwelling structures and imprvements Landscaping, pls, spas, funtains Antennas, satellite dishes Fences, patis, awnings Driveways, walkways, hardscape Exterir masnry veneers (this is nt stucc) e. Pllutin exclusins IX. TYPES OF BASIC BUILDING CONSTRUCTION A. Tilt -Up/Cncrete/Steel (Type I, Fire Resistive) 1. Building elements are nncmbustible material, including rf B. Cncrete Walls/Cmbustible Rf (Type II, Nn-Cmbustible) 1. Similar t Type I, but rf is cmbustible C. Brick and Masnry (Type III, Ordinary) 1. Masnry bearing walls 2. Flrs, structural framewrk and rf are made f cmbustible masnry D. Masnry/Wd (Type IV, Heavy Timber) 1. Masnry walls, but interir wd cnsists f heavy timbers, nt less than 8 thick in any dimensin, wd girder nt less than 6 thick 2. Flr and rf are plank bard 3. N plaster walls and ceilings cvering interir wd framewrk E. Cnventinal Wd Frame (Type V, Cmbustible) 1. Cmbustible exterir walls 2. Typical single-family hme cnstructin methd 3. Wd framing F. Metal Frame Cnstructin Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 15

18 1. Light steel framing mst cmmn, but mre likely fr industrial, nt residential. 2. Special fire cnsideratins re: susceptibility t melting and need fr fire prtectin. 3. Decreased vs. increased csts due t special materials and labr. G. Prtected A v. B 1. Prtected A building has additinal fire rated cating r cver 2. Extends fire resistance rating at least 1 hur 3. Prtected B means n additinal fire rated cating r cver X. METHODOLOGY OF DETERMINING VALUE A. Respnsibilities f Agents/Brkers After AB CCR Agent must prvide the insured with a cpy f the replacement cst estimate at the time the plicy limit is set. Agent must maintain a cpy f the estimate fr the entire term f the plicy plus five years after expiratin. Changes r updates must be prvided within 60 days frm the date generated. Fr plicies which are nt bund, estimate recrds must be kept fr three years. 2. CCR RC estimates cannt include demand surge and agents/brkers must infrm insured f this fact; agents/brkers can apprise custmers that additinal cverage can be btained t prtect fr this cntingency. Agents/brkers wh prvide estimates r rely upn estimates f thers must ensure that the estimate includes all expenses that wuld be reasnably incurred t rebuild the structure (including the cmpnents listed in V abve). RC estimates cannt be based n resale value f the land r the utstanding balance f any lan. RC estimates cannt include a deductin fr physical depreciatin. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 16

19 If it des nt meet the standards, the agent/brker must explain exactly what elements it des nt address. 3. When an Insurance Cmpany Directs the Agent/Brker t Use its Valuatin Sftware When an insurer requires a specific surce r tl t create a RC estimate, the insurer must prescribe prcedures t be fllwed when using the surce r tl; the insurer must prvide the agent training t prperly use the tls r surce; The insurer and nt the agent shall be respnsible fr any nncmpliance. B. Prperty Valuatin Tls (e.g. Marshall-Swift Evaluatin) 1. Des the PVT d the fllwing: Cllect data n a regular basis Cllect wage rates, bth unin and nnunin Assess prductivity rates and crew sizes Cnsider lcal regulatins, debris remval restrictins, license fees, building cde requirements, hillside stability and fundatin csts Cnsider data frm past claims Include architect fees Factr additinal csts fr lder structures Engage in quality cntrl by cmparing real cnstructin csts with claim settlements 2. Xactware Xactimate cmmnly used in insurance industry Value 360 specifically fr valuatin 3. Insurance Cmpany prprietary sftware Develped by carriers fr use f agents Factrs in square ftage, number f rms, type and quality f cnstructin, lcatin and ther relevant infrmatin. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 17

20 Allws carrier t cntrl the variables and estimate t their standards. 4. Other autmated valuatin systems being marketed. 5. Update estimates fr renewals C. Real Estate Appraisals 1. Mre expensive, but it is permitted s lng as the appraiser uses the cmpnent apprach set frth in CCR D. Cntractr's and Expert's estimates r pinins 1. Excellent surce f infrmatin 2. Will likely be mre expensive than the cst f nline sftware E. Cst Per Square Ft Estimates 1. Dated and insufficient basis fr replacement csts 2. Des nt take int effect demlitin, building cdes, cnstructin quality 3. N lnger cmplies with CCR F. Insured's Opinin 1. Used t be gd enugh; n mre 2. Mst insureds dn t have sufficient understanding f cnstructin csts t reasnably estimate an entire hme 3. Insureds are mre likely t cnfuse market value with replacement csts 4. An insured s pinin cannt be used t estimate replacement csts G. Custm Hme Elements and Effect n RCV 1. Replacement cst must take int accunt valuatin relating t custm hmes r pre-1940 hmes: Cst f updating t building cdes Remediatin f lead paint, asbests and the demlitin and remval csts Fire cde upgrades Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 18

21 Cst f riginal materials such as riginal wd flring, special lath and plaster walls and ceilings, uniquely heavy rafters, lumber and sheathing Replacement f stne fundatins Replacement csts f riginal materials such as slid wd trim and drs, crwn mldings, and special decrative tuches The higher skilled labr required t rebuild the hme as it was 2. Accurate valuatin estimates require cnsideratin f the abve issues, unless the insured is willing t accept cmmnly used materials H. Different Cst Factrs that can Affect the Replacement Value due t Lcatin r Type f Cnstructin 1. Husing tracts in suburban areas v. custm hmes in metr areas 2. Independent vs. hmewner assciatins requiring special architectural rules 3. Higher csts fr states, cunties, particular zip cdes XI. FIRE MITIGATION AND HOW IT AFFECTS INSURANCE COSTS A. The Fire Prblem - The Califrnia Wildland-Urban Interface ( WUI ) Fire Prblem 1. Specially adpted Building Cdes fr Fire Hazard Severity Znes and Wildlife Interface Znes 2. Infrmatin n the WUI and applicable requirements can be dwnladed at 3. Specially apprved building materials, and cmpliance with ther requirements is necessary. B. Risk and Hazard Effects in the Califrnia WUI 1. Tpgraphy Fld, landslide, windstrm and fire risks Limited access, egress and firefighter availability Ppulatins expanding int high hazard znes. 2. Fuel types and lcatins Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 19

22 Wild brush Uncleared residential brush Inapprpriate r ill maintained landscaping 3. Weather Drught High winds Rain strms 4. Cnstructin Special requirements fr siding, sheathing, exterir windws, eaves, and decks. Special ignitin-resistant materials. Cunty-by cunty requirements. 5. State Fire Marshall Building Materials Listing Prgram C. Laws that Impact the Mitigatin f Risk and Hazard 1. Current state and lcal laws statutes and regulatins that address effrts t mitigate risk and hazards 2. Requirements fr defensible space and fire-resistant requirements Brush clearance rdinances Trash abatement rdinances Flammable substance strage rdinances Restrictins frm activities, e.g. Firewrks, leaf burning. 3. Building cnstructin Fire suppressin systems Nn-flammable and treated building materials 4. Land use and planning Area fire mitigatin plans Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 20

23 Mandated practices, methds and materials D. Hw T Prvide Mitigatin 1. Evaluatin f insured s management f fire threat Brush clearance and abatement Husekeeping re: trash, strage f flammable substances Area-apprpriate landscaping and building materials Fire suppressin devices and systems 2. Using a cmplete fire prtectin apprach that recgnizes sund engineering (building cnstructin) and land use (defensible space and vegetatin mdificatins) 3. Hazards in using mre than ne "tl in the tl bx" t address the risk and hazards assciated with the WUI and reduce the ptential fr lss XII. NEW REGULATIONS IN THE CALIFORNIA CODE OF REGULATIONS A. Sectin : Standards fr Real Estate Appraisers 1. Requires valuatins by real estate appraisers t cmply with these regulatins 2. Reference t CIC (d) B. Sectin : Maintenance f Dcumentatin 1. Applies t licensees making valuatin estimates 2. Prescribed dcuments t be maintained in insured/applicant file, including all dcuments used t determine the estimate/amunt C. Sectin : Prducer Standards and Requirements 1. Requirements fr valuatin estimates 2. Requirements fr reliance n replacement cst 3. Requirements t set r recmmend a HO plicy limit 4. Lists what cannt be relied upn 5. Reasnable steps fr verificatin f estimates prepared by thers 6. Prducer respnsibility fr estimate Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 21

24 7. Vilatins, with penalties 8. Cmpliance requirements and insurer respnsibility Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 22

25 Hmewners Insurance Valuatin: What Agents and Brkers Need t Knw Mderatr Kristi Dean, J.D. Kristi is a principal at the law firm STONE ROSENBLATT CHA in Wdland Hills. A graduate f Pepperdine Schl f Law, Kristi has been practicing in the insurance law field since Kristi chairs the insurance practice grup at SRC, which encmpasses insurance cverage, bad faith insurance litigatin, insurance agent errrs and missins, and services insurance agent and brker transactinal needs. Kristi is an experienced lecturer as well as successful lecturer. She is a Califrnia Department f Insurance cntinuing educatin prvider and has presented in seminars and prgrams thrughut the United States and the UK n insurance-related tpics Kristi is a member f industry rganizatins including CIWA, NAPSLO and serves as a cmmittee member fr the bad faith and fraud cmmittee with the Cuncil f Litigatin Management. Karen Bever, CPCU, ASLI, AIM Panelists Karen started in the insurance business in May f 1973 as an agent at The Prudential Insurance Cmpany in Tucsn, AZ. In July f 1974 she mved t the Prperty and Casualty Divisin in Scttsdale, AZ. In the last 38 years, virtually all f her career has been devted t underwriting, in persnal lines. Karen mved t American Reliable Insurance Cmpany in August f 2000 as an Operatins Supervisr, but was quickly mved t the Agriculture Underwriting team fr abut a year and a half until that divisin was mved t Omaha. She then mved t ARIC Persnal Underwriting, where she has been fr almst 9 years. Karen cmpleted her INS curses arund 1993, and three years later she btained her CPCU designatin. She then gt her degree in Business Management in Oct f She has cmpleted Assciate designatins in bth Management and in Surplus Lines Insurance. Karen has cnducted dzens f underwriting classes fr agents and underwriters Persnal Lines Underwriting is her first lve and sharing with thers is her first jy. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 23

26 Leslie Blzan, J.D. Leslie Blzan began her legal career as a clerk fr in-huse cunsel at Great American Insurance Cmpany in 1976, and has wrked in the insurance field ever since. A graduate f Lyla Law Schl in Ls Angeles, she has split her fcus between civil litigatin defense, insurance defense litigatin and insurance cverage. Leslie is a senir assciate at firm STONE ROSENBLATT CHA where she is a frequent cntributr t the firm newsletter and prvider f inhuse cntinuing educatin seminars within the firm. Other seminars presented include certificatin training fr Lndn brkers and presenter at CIWA cnferences. A member f the Califrnia bar since 1978, Leslie is admitted t practice in all curts f the state, as well as in multiple United States District Curts, as well as the United States Curt f Appeals. Over the curse f her career, she has defended bth insureds and insurers befre judges and juries and in numerus arbitratins, appraisals and mediatins. Mike Newfield Mike Newfield has been wrking in the insurance industry since 1968, when he started ut as a multi-lines adjuster fr Maryland Casualty in New Yrk. Over the years, he gained experience, wrking fr carriers, MGAs and TPAs. He is currently emplyed by Dynamic Claims Services, Inc., where he was wrked fr the past 14 years. His current psitin is Accunt Manager, with respnsibility fr supervisin and handling f SIR accunts - CD quality cntrl fr reprting t NACIC and the handling f CD, GL, GKLL and prperty claims. Mike als serves as an expert witness, insurance appraiser and insurance umpire. He is familiar with the full range f cnstructin issues, including cnstructin defect, valuatin and replacement csts. In additin t his insurance duties, Mike vlunteers his time t lcal gvernmental entities. He has served as Traffic/Transprtatin Cmmissiner fr the City f Calabasas since 2003, and is a crdinatr f the disaster respnse team (FEMA/CERT) fr the City f Westlake Village. He is als a bard member and past president f the Malibu/Lst Hills Sheriff s Fundatin. Gidn Vardi, Ph.D. Gidn Vardi has unique qualificatins as a licensed building cntractr hlding a Ph.D. with a specialty in insurance appraisals. His building experience includes the full range f residential and cmmercial cnstructin. Gidn is als an ICC Certified Building Inspectr and ICC Certified Accessibility Inspectr/Plan Examiner. He is qualified t research and give expert pinins regarding cde cmpliance, safety, ADA cmpliance, cnstructin cst estimates, scpe r repair estimates and he is Califrnia Building Cde certified. As president f XL Services, Inc., Gidn Vardi is invlved in bth frensic wrk and regular cnstructin activities. He has qualified as an expert witness in curts thrughut the state f Califrnia. Apart frm his frmal educatin and cnstructin experience, Gidn is trained as a mediatr, having attended the prestigius Straus Institute fr Dispute Reslutin at Pepperdine University Schl f Law. Hmewners Valuatin Curse Materials Cpyright 2011 Stne Rsenblatt Cha Page 24