In the wake of the destructive and horrific California fires, it has been reported that at least 40 people have died and 5,700 homes and businesses have been destroyed since the wildfires began making it one of the deadliest fires in California’s history. In just 30 seconds a single flame can turn into a full-blown fire capable of great destruction. Although wildfires are uncommon in New York, other causes of fires including electrical problems can destroy homes and other buildings. What may surprise you is that your home insurance may not cover your losses if your house is destroyed in a fire.
In recently reported news, two years ago a woman in Long Island was denied her claim after a house fire. The reason? Her application failed to mention that she owned a pit bull. Last year a family in Queens lost their home to a fire. What was the insurance company’s reason for denying their claim? The house had a third apartment and the family was only paying to insure a two-family structure. Later that same year a family in Middletown was forced to pay out of pocket to stay at a hotel after a house fire because the home insurance policy didn’t cover rent in the event a family is displaced by a fire.
When an insurance company fails to pay on a claim there are two potential causes of action: Breach of contract and breach of the duty of good faith. A breach of contract claim is based on the insurance company’s failure to pay according to the terms of their contract whereas a breach of the duty of good faith is based on the insurance company’s failure to thoroughly examine a claim and reasonably negotiate a settlement. Unfortunately, New York is one of the few states that does not permit a private cause of action against an insurance company for bad faith. Despite this, the New York Court of Appeals has held that policyholders can recover consequential damages or “extra contractual damages” from insurance companies if the damages were foreseeable at the time the policy was written. However, subsequent cases hold that these damages must be alleged within the breach of contract claim not as a separate bad faith claim.
Since lawsuits against insurance companies for failure to pay claims are limited in New York it is important to make sure your homeowner’s insurance policy adequately protects you in the event of a fire. Some tips when shopping for homeowner’s insurance are as follows:
- Ensure that the information on the application is complete and accurate
- Make sure the policy covers rental fees in the event you are displaced from your home
- Look for language that protects the contents of your home in the event they are damaged in a fire
- Make sure it covers other detached structures on your property such as a garage or shed
For additional information or in the event you have been injured in a fire, contact the legal team at Spiegel, Brown and Fichera.