Wait, what? Welcome to this episode of the justice team podcast on the justice team network, where we give practical how to's for lawyers and, you know, everyday folk to be able to make them understand the law and how it works. And today we are very honored to have on the insurance Avenger. That's actually her Instagram handle, the insurance Avenger, Sarah McLean.
Good morning.
So Sarah is one person that I lean on for Advice on insurance policies and things like this because it's a very specialized area of law
Yes, or boring as some people like to describe it
All right, give some folks uh, just your background and how you got to love for you know, reading these policies and analyzing them
Well, I don't think it'll come as any surprise that I didn't grow up wanting to be an insurance lawyer um, it was something that I fell into after law school, um a Graduated in 2009, best time to be looking for a job as a new lawyer, and a firm that was hiring, uh, was hiring for a particular case that was going to trial. Uh, it was a rescission case, um, involving insurance application with misrepresentations. And I was hired exclusively for that case.
And, um, I got an 1800 page claim file and put it in cron order and started to, to look into this case. And it was a, a woman who had her, it was her third house fire. Um, and it was, it happened within a short period after the policy was applied for. And, um, so it became a lot more fascinating than about, you know, misrepresentations and reliance and all that other stuff that I really barely passed in law school anyways. Um, and I just really enjoyed it.
And it was something I was really good at and it's, it made sense to me. And so, um, I just went with it
because, you know, I've done enough of those third party, we call them third party bad faith cases to realize that insurance companies will find any way to try to rescind a policy, deny coverage, all these types of exclusions. And if you don't know how to fight back, it's, that kind of sucks. So can you give our, our listeners and viewers an understanding of the difference between like what we consider a first party claim against insurance and a third party claim?
Yeah, of course. So a first party claim is a claim that you make under your own insurance policy. Um, and that can be whether it's homeowners policy with property damage, um, under your, obviously your auto policy, if you've got comprehensive things like that. Um, and then a third party, uh, claim is if you were making a claim against someone else's policy and most typically we see that with the liability coverage.
Yeah. And I know you're doing a lot of work for the fire victims here in Southern California. So I'm going to use that as a use case here. So you know, Altadena, Pasadena, Sierra Madre areas, the third party, the person responsible is Edison, right? I want to concentrate on the first party stuff because, you know, We're doing the best we can. They're not like super experienced first party coverage lawyers to give general advice. But again, we'd like to lean on you.
So can you kind of walk us through your process whenever people come to you? Cause we have different buckets of folks. First this talk about people that do have insurance on their properties that burn down. What are the steps that you take?
Okay. So we're primarily, we're dealing with homeowners. I mean, you know, a lot of discussion has been on the homeowners. Um, There's also business owners, obviously, um, business owners who lost their, their property, their business. Um, but when it comes to, to homeowners, number one is I find out who's the insurance company because then I know what I'm dealing with and sort of what the, what the playing field looks like, um, and what to expect and, and how to prepare for that.
And then I want to look obviously at their policy, mainly their declarations. Um, so that I understand what their coverages are and what their limits are. Um, and obviously, uh, I know a lot of people have been talking about under insurance, um, and that is unfortunately, uh, a real issue.
Nobody has more insurance for the value of their home. We're seeing anyway. Right?
Right.
Nobody's overinsured. Yeah. So you have, so on the declaration page, homeowners, what should they want to know? What coverages do I have? What can I recoup? What are the things that you're seeing on these policies?
Um, well, I'm seeing people realize that I obviously we've got like the dwelling coverage. Your standards homeowners policy is going to have dwelling coverage, which is going to cover the house other structures, which is going to cover basically anything that's affixed to the land. That is not your house. So your garage or pool. Uh, fences, sheds, things like that.
Your garden, all these things. That's other structures.
Not with the garden quite, so there's see, there's a separate coverage for that for trees, um, shrubs and landscaping. So, it all really depends on what the policy, um, you know, what the what the policy language is. Um, and so, but you want to look for those coverages on the declarations page. It won't have any detail about the coverage, but at least you know that okay.
I've got dwelling for this much I've got other structures for this much personal property and then either they some policies call it loss of use others call it Additional living expenses.
So yes, so whenever the because people ask like what are my Can I go rent? What coverages do I have? So they're looking for loss of use. So what are the, what are the terms there? Cause there's different policies. Just so everybody's listening insurance, label things different ways per company. So what should we, we'd be looking at to see if there's rental.
Okay, so rental coverage actually can be one of the trickier coverages, um, because you don't own the building structure, but you still have an insurable interest in certain components of the building because
that's the text. I mean, if on your insurance policy, if people say you own your home and there's a provision on it to. I got to go rent somewhere now because my house burned down. Okay. What's that coverage called?
Okay, so that's additional living expenses or loss of use. Um, under fair plan policies, it's called fair rental value because that coverage is a little bit different. Um, but the standard homeowner's policy is going to have, um, loss of use and the overall coverage, uh, insuring provision allows for, um, reimbursement for any expenses that are incurred. Um, incurred is an important word.
Okay. Um, any expenses that are incurred in order for a insured to, uh, maintain their normal standard of living.
Yeah. So what's, when they see that number, it's usually a gross number, like 200, 000.
Yeah. It's usually a lot of the coverages other than dwelling are a percentage of your dwelling coverage. Um, so a lot of people don't know that they need to look at that number and, and adjust it and see, you know, what would it take, you know, how much would I spend in rent? Um, if I've got unique animals that I can't keep with me in a rental, um, the boarding cost for that and things like that, it's, it's something that a lot of people don't really think about.
Um, but that limit that's on your policy, if you've got a dollar limit, um, that is unfortunately going to be the cap of what the insurance companies are required to pay.
It is that, I mean, could you rent one place for one month for 200, 000 if that's the cap or, I mean, What's the play
so that so there's a difference between what the policy covers and allows for versus what is going to work for an individual insured in the long run. Um, you know, there are people who, uh, their homes were 5, square feet. Um, but they only have say 000 in, uh, loss of use coverage. And if you're looking at an 18 months to 24 month rebuild period, um, you're going to run out of that money.
If you Find if you insist on having a rental that is the same as your as your prior home Um, and so people are just being practical about that and also being realistic about the housing market and and really what's available so You got to kind of
take that number and see if you can stretch it out 18 months, 24 months for the rebuild process.
It's like going back to college and having to do that budgeting. That is so difficult.
Most everyone's going to be underinsured with the housing market here in Southern California. So. How do they make up the difference?
Um, well, it just depends on where, you know, what their circumstances are, what resources they have, um, especially with a lot of generational families. Um, a lot of them have been staying with, with each other. Um, but there are a lot of other resources out there for assistance. Um, and I, I have to say, you know, I was born and raised in LA. I know I'm a, I'm the San San Diego Padres fan now. Uh, yeah, we see
the shirt. Yeah. Very we'll. Let, we'll let the comments talk about that. I, yeah. . Sara: That's all right. Um, fryer faithful here. Uh, but. You know, I am, I am overwhelmed by the outpouring of support and commitment by so many community members and so many organizations and it really is, um, very encouraging for, for, you know, the community in the long run. But there is FEMA assistance, there is, um, you know, the SBA, the Small Business Administration.
Will FEMA help if you're underinsured?
So, yes. But the question that I still am wondering is when will that help come because they want you to exhaust All your your funding. So
let's use the situation. We have a lot of generational families in Altadena that they lose their home They they will then stay with a family member but say that they have this rental coverage on their policy Can they have their family member charge them rent so that the insurance pays? Like what, like what do we do in this situation?
So it's interesting that you bring that up. And my number one piece of advice is just be very careful about how you're handling that part of the claim and how you are transacting things and documenting it. Um, just because it's, it's kind of a, excuse me, Um, it's a little bit of a confusing coverage. It really is one of those, it depends kind of things, um, because it's whatever you need to maintain your normal standard of living.
And you and I, you know, one person to the next has a different standard of living. Um, and even though you're staying with a family member and you would otherwise have to pay rent if they weren't letting you stay for free. Unless you are actually handing that money over and incurring an obligation. And that's why I mentioned before about that being really important. So get a
rental contract and really go through the process. I mean, I'm of the sense if you had insurance and you're paying for it, exhaust every single penny that you can. Oh, that's the way I feel about it.
Policy limits.
Policy limits. So a homeowner comes and Say their house burnt down and they're under, they're obviously don't have enough coverage. What steps do they do next?
So, well, first is to make the claim with the insurance company, um, and get them to pay out everything, um, that they owe.
And you just write a letter and say, pay my policy limits, total burn, here's the photos, pay it.
If anyone is able to do that, that, that easily, I'd love to know.
Well, they give you 30 percent upfront, right? They say, here's 30 percent of the policy upfront,
right?
So send an adjuster over to. Take a photo to make sure everything's damaged, right?
So at the core of every insurance claim is the insurance company's duty to investigate and that Scope of of duty it applies no matter what the circumstances are And so what they have to do to investigate obviously depends on the circumstances of the claim But in this instance, when it is obvious that the homeowner is underinsured, and it is a total loss, and it is going to be 18 months to, to rebuild, you, you know, they have to have some kind of paper support,
they call it supports in the file, right? So that they're not just like throwing money out at, you know, whoever they feel like it. but they need to relax the standard and the rigidness of their, their standards for what is sufficient to justify that payment.
Yeah. And there's, there's the other part of the coverage. So we have dwelling, we have rental use other structures, and then we have other personal property, right? That's a big one. OPP OPP, you know, me naughty by nature stretch. Um, so OPP, your personal property. coverage for that, but that's, that's the one that's the gray area, right? Cause sometimes they're like, well, did you really have like some out of. In your home,
right? Yeah. So if you have a water damage claim, obviously demonstrating your personal property losses are is relatively easy because everything's still intact. Fire is very difficult. Um, every single homeowners policy has a requirement that you submit an itemized inventory. With the most, some of the most ridiculous details that nobody can remember, like, you know, how much you paid for that sofa that you bought in 1996 or, or something like that.
Um, it's, but it is a standard policy, and it is required in order to, you know, substantiate the amount of losses, but insurance companies are supposed to be reasonable. Right. Because when they are not reasonable, then they get sued for bad faith. But
this, I think this is the, this is the more gray where I think insurance companies could trip up because if they really, it's like, I mean, come on, people's houses burned down. You have X amount of coverage. Like obviously you could take a look at people's social media and be like, yeah, they're, they're home. The contents of their home and personal property is very likely over that. So let's not mess around,
right? And that's really what they should be doing, especially in the total loss circumstances. Um, unfortunately right now they're not, um, that being said, uh, there was a bill recently introduced to the state legislatures, um, that would mandate the insurance companies to, uh, waive the requirement that you submit the itemized inventory.
Uh, in instances of total loss and shout out to my former high school, uh, classmate and ASB president, Ben Allen, who is now a state, uh, a state legislature. And he, uh, he proposed that bill. So
Ben Allen's been a huge ally for consumers and victims. Um, I mean, he's been, I've never met him, but I could see the bills that he writes and support. So Ben Allen, if you ever want to come on the show, you're a huge advocate for everything that we believe in. So we'd love to talk to you
and we'll have a San Juan high reunion.
There we go. So, um, We went through you file a claim. This is some of the things we do. Let's talk about another bucket of folks renters Uh, I get a lot of questions about renters, uh business renters and homeowner renters. What are their rights,
right? and so I'm, one of those people that I I know What what toys I have to play with in my sandbox and so in that instance, I you know I talked to landlord tenant attorneys who are more Familiar with the nuances of landlord rights and things like that Um, if a renter, the issue that I'm seeing with renters is, is that they get the stuff handled for what they have coverage for. So their personal property. Their additional living expenses,
but under which policy?
So there there's a, so there's a renter's insurance has got, um, there's, there's a renter's insurance policy and it basically covers everything except the structure.
So that's if they have a renter's. Policy
correct. And it depends. I think you can get structures coverage on a renter's policy just because of what is defined as part of the building. You know, if you bought a, you know, if you made improvements to your, to your, uh, apartment or your condo, you know, that's part of the realty, but that's still yours. And so that should be covered under building, but they are having, what I'm seeing with renters is they're having issues with the landlords not doing the necessary.
repairs, cleaning, taking the situation seriously with respect to, to the building. And in those instances, you know, we have the implied warranty of habitability.
So that's from a landlord, the owner of the property, the employer, implied warrant. It means you got to make good on your property, right? If you're renting to somebody and it's implied that you'll do in good faith. So you have landlord. So I get this question a lot, like landlord won't let me back onto the premises. Even to sift through my ashes. My landlord won't let me back in or not Rehabbing the building yet if it wasn't totally burnt down What do we do in these situations?
Read your lease read your rental agreement go to the contract those there are laws that apply to landlord tenant relationships But then there's also the contract and that's what I say with insurance claims too is what it's what does the policy say?
The policy is a contract between you and your insurance company.
Yes
Renter, look at your insurance between you and the landlord, whether you're a business or a renter of your personal home.
Yeah, no, I mean and especially too because some language, you know, the language in those leases differs um, but at the you know, and often um, There is a provision that if the property becomes uninhabitable that the tenant is allowed to to break the lease And then can you know go free and clear?
Um the the rules regarding if somebody does do that the rules regarding regarding um security deposits Obviously still apply so it's and I will say with the landlord tenant issues There are a lot of organizations and agencies that specialize in helping tenants and advising them of their rights so I definitely encourage anybody that's got issues with their landlords to to reach out because Um, I think that is definitely a particularly vulnerable vulnerable population A segment
of the population that's being affected.
So how about this situation this last topic just Homeowner property owner has a renter It burns down. Homeowner has a policy for rental value, loss of rental value. Now they weren't living there, they were renting it. Can they use that, that coverage? It's almost like a loss of income for the rental.
What does the policy say?
Uh, the typical policy just says like, So,
so, Because they weren't living there. Right, and so a typical policy recognizes that, that that is a common occurrence. And so they'll have, that's the true loss of use or fair rental value coverage. Um, so if you've got an existing tenant and there's a lease and it demonstrates how much you would have received in rent, you can submit that to your insurance company. Okay. Um, and they would be required to reimburse you for that.
That being said, before, I, I, again, consult your policy before you, you take that step because it, there could be gray areas or it could be sort of, you know, you didn't realize it didn't have that coverage, um, so you just always want to be, you know, very careful and do your due diligence and, and every step of the claim.
Yeah. And that's where you get that number. You divide it by however many months and see if you have enough time to rebuild during that process. Okay. Thanks. and still be able to recruit your fair rental value.
Right.
Great. Um, so again, how do people reach you, Sarah?
Um, they can, uh, they can, uh, they can send out the bat signal right now. Um, they can't, I I'm on Instagram at the insurance Avenger. Um, I can be reached at Sarah at the insurance Avenger. com. Um, and I, if people really want to find me, I'm sure they can get ahold of me one way or another.
Yeah. And you know, Sarah's a new member coming to justice HQ. We appreciate your insight and building the community and teaching everybody about insurance and stuff like this. Cause I learned so much on this episode. And you know, sticking with the Avengers, I think you'd love in a lot of our Locations. Like we have a group in the orange County one, and we have a giant Hulk that's actually down in the basement here. So there's a lot of like Avenger Jason stuff going on.
Oh, totally. No, it's a lifestyle.
It's a lifestyle. Well, thank you for, thank you for fighting for folks. Like Sarah's been like literally boots on the ground, helping people, you know, whether in a church or like in a parking lot. Um, giving people advice
outside of the back of my, my minivan.
Yeah.
Shout out to the minivan mafia.
Yeah. Many vans are awesome. You can put a lot of stuff in there.
Oh, don't get me started. I could do a whole episode on that.
All right. Thank you for listening to this episode of the justice team podcast on the justice team network. You can go to the justice team network. com or you can watch on YouTube or anywhere it is, but please reach out to Sarah with any insurance questions. Thank you all very much.
so much.