HH: I am joined now by Michael Bidart. Michael is one of the partners at the law firm of Shernoff, Bidart and Echeverria LLP. And I asked him to join me, because after six weeks of natural disasters, three hurricanes, a week of a massacre in Las Vegas, we now have thousands of homes burned to the ground in California. And Michael Bidart is well known as a lawyer who represents people who have been screwed by insurance companies. And certainly, that’s going to happen in some places around the country. Michael, welcome to the program, it’s great to have you on.
MB: Thank you very much. Good morning.
HH: Good morning, Michael. I think we were on pause there, so let’s go back and tell people you are with Shernoff, Bidart and Echeverria. What is your specialty?
MB: We call it insurance bat saves. It’s basically representing insurance consumers who have insurance policies and then are denied or delayed on their coverage.
HH: Now we’ve got thousands of people who have lost their homes in California, and across the country to flood and wind. How often does this happen? People, you know, I’ve got USAA. They just don’t do this. How often does this happen?
MB: Actually, more often than you would hope. By and large, some of the major companies such as USAA, for example, USAA has a good track record by comparison to many of the other carriers. But of course, it’s not perfect, either. There have been occasions where even with USAA, we’ve had to go to trial when they take positions that are unreasonable. But it does, in every major catastrophe, unfortunately, it seems, going back to the Northridge earthquake and the other Southern California wildfire cases, the industry seems to come up with reasons not to pay, whether it’s the way they handle a deductible, or the valuation methods under the policies. There’s always some kind of issue that comes up that harms the consumer.
HH: Have you ever seen anything like the pictures we see coming out of California today?
MB: No. I was heavily involved, of course, in the Northridge earthquake, but their structural damage was unbelievable. But here, you basically have absolutely to the ground devastation of homes. The closest that I dealt with was the Oakland Hill fire, which again, in those cases as well, many of the homes were just completely to the ground, foundation.
HH: It is so troubling to me, and we still don’t know if my wife’s best friend is going to get back to her Green Valley home, but if it does, if the worst happens, what’s the first thing she or any homeowner should do following a fire loss?
MB: No question about it, immediately notify the agent from whom you purchased the policy and the carrier itself. Many people, unfortunately, in a fire, lose their policies and they don’t even have the policy. But you need to try to remember, obviously, who you’re covered by, and who your agent was. Most people would remember that. And then get a copy of the policy. It’s essential, because the good news is, for anybody that has homeowners insurance in California, that if they have a homeowners policy, they are for sure covered for the peril of fire, because that’s a mandated coverage. It’s the only peril that’s mandated in California. But the method of valuation of the loss that is the measure of damages is different in every policy, depending upon what level of coverage you purchase.
HH: Now I don’t do this work, but I, and I don’t know you, but I know your reputation. Tell me if my advice is horrible or good. Don’t sign anything until you’ve talked to someone.
MB: That’s right. That includes any documents presented to you by your insurance company, and also that many people will be approached by public adjustors or other people, consultants wanting to help them, and not all of those people are bad by any means, but the point is they should get good advice from people that they know and trust. And that’s the important thing. And also, what people often times don’t realize that under a homeowners insurance policy, you should not be required to sign any release whatsoever in consideration of getting money from your insurance company. The insurance company’s obligation immediately upon notification is to begin the process of conducting a fair, balanced and thorough investigation of the claim with a view toward paying the claim. That’s what the law requires in California.
HH: I’m talking to Michael Bidart, who is one of the premiere insurance bad faith lawyers in the United States of America out in California. What happened, when do people get screwed, Michael? What happens after a fire that people get screwed?
MB: Well, a variety of ways. Historically, first of all, in any homeowners policy, there’s basically two parts to the policy. Part one is commonly referred to as the property insurance. This is the insurance you have on those physical structures on your property – the home itself, the out buildings, the pool, the pool house if that applies, the contents within the dwelling. So you have within the property coverage various parts. You have dwelling, you have contents, you have additional living expenses, debris removal, etc. Part two of the policy won’t even apply here. That’s third party liability. That’s the coverage you have for someone coming over to your house and slipping and falling and hurting themselves, so just disregard that. Second one is the property coverage. But the common areas of insurance company abuse have to do with the valuation of the loss. And let me give you an example. In the catastrophe right now up north, imagine what’s going to happen up there in the effort to rebuild those homes that are burnt to the ground. The costs of supplies, the cost of lumber, all of the normal costs you would expect, for example, when you had one fire in a large neighborhood of a house, that’s not going to have an effect on the cost of material. But now, all of the economics change…
HH: I hadn’t thought of that. Yeah, supply and demand.
MB: Yeah, it’s going to…
HH: They’re going to go through the roof, of the non-roof, yeah.
MB: Right. That’s correct. There you go. And what, the problem is the insurance industry, because many of the companies that are heavily penetrated in the market area there – State Farm, Farmer’s, Allstate, the normal major homeowners policies, they utilize resources books on publication of what the cost is to repair certain property. Those are published in advance, and those are published based upon normal conditions in the marketplace. This is not a normal condition right now. That coupled with the fact that the reality is, and I know that obviously from years of having dealt with the industry, they can’t help themselves. They want to save money. They, many of them are stock companies. They’re, the cost of a calamity like this is part of their cost of doing business. And any business, including an insurance company, their profit is defined by how much money they take in, in premiums, and how much they have to pay out in claims. The difference between the two is their profit. And they want that profit to be as much as possible, and that’s the tension. The obligation that an insurance company has under California law is to absolutely disregard their own profit considerations. They must give as much consideration to their insured’s interest as they give their own, and that’s a high duty.
HH: Michael, last question, and it really goes to businesses more than residentials, because a lot of them have been wiped out. High schools have been wiped out. My law partner, Robert O’Brien’s high school burned to the ground. What business claims arise that are different from residential claims that also insurance companies are inclined to minimize or avoid?
MB: Yeah, a huge area of abuse. For example, we learned that many of the really major wineries, big name wineries up there are either damaged or completely destroyed. It’s a tragedy. And these businesses now are going to be out of business for a long time, maybe some of them forever. Those are business interruption claims, and those policies that those businesses have, have additional coverages for business interruption. And that’s a huge area of dispute, historically, because it all has to be done by what’s, you know, it’s referred to as forensic analysis. In other words, proof in a courtroom of what those business losses are. That is all based on historical performance, where you’re presenting your claim, and you’re saying I’ve made this much here, here’s my trend of performance, and had it not been for the fire, I would be making this much in the future. And necessarily, you can imagine that that is something that is even far more difficult to agree upon, and to identify, than, for example, the costs to repair a house physically.
HH: Oh my gosh, a nightmare. That’s why you need to talk to people. Just don’t sign anything, America. By the way, Michael Bidart, among the best in the business, if you want to get in touch with him, you can just Google Michael Bidart, and I think his phone number is 909-241-9800. 909-241-9800. Michael, thank you. I may check back with you as the epic scale of this disaster unfolds in real time. But I appreciate you taking time with me this morning.
MB: I wish everybody luck. Thank you, Hugh.
End of interview.