Napa Earthquake Losses: Insurance Coverage Matters

Early published estimates place earthquake-related losses from the Napa earthquake on August 24, 2014, at over a billion dollars. Northern California residents and businesses can learn from the experiences of insureds who suffered similar losses during the 1995 Northridge earthquake.

Those who suffered losses should quickly document their losses and carefully examine their insurance policies for sources of potential coverage for earthquake-related losses. Insureds should keep receipts related to the losses. To further prove the losses, taking photographs and/or videotapes is advisable. An inventory of lost or damaged property should be prepared. If an insurer sends a check as an advance or to cover losses, you should carefully review the transmittal letter and check for any language that the insurer might claim constitutes a release.

Although insurance policies typically exclude to some extent coverage for losses caused by earthquakes, it is critical that an insured review all policies in their entirety before concluding that earthquake-related losses are excluded. It is important that an insured promptly provide written notice to its insurer. Courts may require that an insurer be prejudiced due to the late notice that it received from its insured. Mt. Hawley Ins. Co. v. Federal Sav. & Loan Ins. Corp., 695 F. Supp. 469, 480 (C.D. Cal. 1987).

The deadline for submitting a proof of loss statement depends on the policy language, but an insured sometimes must provide a proof of loss within 60 days of the loss or within 60 days of the insurer’s request for a proof of loss.

In seeking guidance through the process of submitting a claim and documenting its losses, an insured may call upon its broker or agent. A broker or agent can be a valuable source for locating policies and notifying insurers. However, an insured should bear in mind that its communications with a broker or agent likely are discoverable by the insurer and thus should seek legal advice as appropriate.