In August 2023, the Gray and Oregon Road wildfires burned 20,000 acres and destroyed 366 homes, revealing a significant underinsurance issue among homeowners in Spokane, according to the Washington state Office of the Insurance Commissioner.
The fires led to 355 major dwelling claims, each involving at least $10,000 in dwelling losses and $10,000 in personal property losses. Of these claims, 244 paid out the full amount of the coverage, and 162 remained open.
Washington Insurance Commissioner Mike Kreidler noted that the high number of claims paying out to coverage limits indicates many homeowners’ policies may have been insufficient to cover total losses.
“It’s a tragic loss for the people involved in these fires and an unfortunate situation to not be made whole after a life-changing event,” Kreidler said in a report from AM Best.
Among the 244 claims that reached full coverage, 75 lacked extended replacement cost coverage, and nearly one-third of policyholders with major losses had been dropped from their previous carriers.
Aaron VanTuyl, a public affairs specialist for the insurance department, explained that the comprehensive damage caused by wildfires, compared to typical house fires, often leads to claims that exceed policy limits. In a standard house fire, parts of the structure may remain, making repairs possible.
However, VanTuyl said that in a wildfire, “it’s a complete loss. Everything is destroyed and you’re rebuilding from the ground up.”
He added that underinsurance issues may also arise from homeowners not fully understanding their coverage or failing to update policies as building costs increase.
The underinsurance findings came from a data call issued by the insurance department earlier this year. This data showed that 737 total claims related to the fires were filed, and 644 of those claims received payments.
As of July 31, 2024, insurers had issued a total of $212.18 million in claim payments, with an average payment amount of $320,000.
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