According to The Malibu Times, 720 homes in the 90265 zip code were burned to the ground in the Woolsey Fire and about 1,600 structures were destroyed in all, plus many others had significant smoke and ash damage requiring major renovation. To most who suffered losses, it seems to be a daunting task to rebuild or restore their home; my argument is that they can take this opportunity to turn a huge negative into a major positive.
In 1993, the Old Topanga Fire burned through the Las Flores and Big Rock neighborhoods, destroying almost 400 homes. My house had severe toxic smoke and ash damage (some of which I still find 25 years later), and I represented a Big Rock homeowner whose house was burned to the ground. His insurance company was dragging its feet on the rebuild, so I sued them for bad faith on his behalf (charging an hourly rate, not a continent fee). He had a full replacement value policy, and during the ensuing litigation, we rebuilt the house. Two years later, he ended up with a beautiful new home.
Claims policies of insurers
Those who lost their homes in the Woolsey Fire have an assortment of different property insurance policies, with insurance companies who have different approaches to insurance claims by their insureds. USAA, for example, in one case I know of evaluated the claim of one insured who lost a large house and many valuable contents, and they immediately decided to pay the policy limits on structure, contents and loss of use. They gave their policyholder one check covering the entire loss to be used as they saw fit thereafter. This is probably an exception, unique to USAA and the facts of his case. Other property insurers, such as State Farm, Farmers and Allstate, may adopt far more restrictive claims practices.
And then there is the Fair Plan, which apparently has a $1.5 million limit on all claims for all purposes. If the cost of an average rebuild is about $500 per square foot and it was a 3,000 square foot structure, the rebuild would take up the entire limit just to rebuild the home, leaving nothing for the contents loss or the loss of use (renting a home during the rebuild process) coverage. Obviously, in this situation, the insured has to decide how to spend the money, often in conjunction with his or her mortgage holder, who is obligated by law not to abandon the homeowner after the fire. If there is no mortgage, that makes the job easier. In addition, the insurer has the right of subrogation, which means joining the homeowner in suing third parties that may be responsible for causing the fire, if they wish.
Debris, foundation and water
Once the debris from the fire is cleared, and the foundation is either allowed to remain or is redone (sometimes a very significant cost for hillside structures), the City of Malibu or the county, if past history is any guide, should adopt an expedited permitting process for the rebuild. [New thought: for the rebuild, consider adding a basement instead of a slab. I grew up on the East Coast, where many homes had basements, which would not add to the footprint of the property, or violate Malibu’s view protection ordinance, as the basement would be underground. Adding a basement may complicate the permitting process, however.]
If the LA County Fire Department stands in the way of the rebuild process, massive class action litigation will almost certainly result. The City of Malibu and local LA County communities may even decide to create local mini-fire departments with smaller fire engines to access homes up roads and driveways with less that the 20-foot width that the LAFD desires. And some homeowners may decide to build their own water tanks and obtain personal electrical generators to supply their homes in emergencies.
The rebuild process
Depending on the type of property insurance policy the homeowner has and the claims practices of their insurer, once the actual rebuilding process begins, the homeowner has many options. Most insurers are more concerned with how much the rebuild will cost while the City of Malibu and the county are most concerned with not exceeding the “footprint” of the original home, determined by the size of the slab. (The city will allow a 10 percent increase in the footprint without requiring more difficult permitting.) What the home looks like, or the inside of the home, should be up to the homeowner.
For new homes constructed after Jan. 1, 2020, the California Energy Commission has recently issued regulations mandating that such new homes all have solar, with certain exceptions. Whether this regulation applies to Malibu rebuilds is uncertain at this time, but why not do the rebuild with solar? It will lessen future electricity costs and increase the future value of the new home.
And why not rebuild with future wildfires in mind, by constructing the new home with materials that are as fire-resistant as possible and have new landscaping that will provide safe space against these fires? This would also increase the chance of saving the house in a future fire and decrease future property insurance costs. Pepperdine was built with future fires in mind and used Spanish architecture that was fire-tested. Most insurers and governments should go along with these changes.
The interior of the new home
Regarding the interior of the home, most homeowners have things about their house that they did not like and the rebuild process might be a time to make changes that make the home more user-friendly. Getting an additional bathroom might be difficult, but if it is desired, it should be attempted. Low water use toilets and showers might convince the city or county planners that the additional bathroom should be allowed, especially for former older homes that did not have these modern amenities.
Enlarging the master bedroom or adding walk-in closets would probably be OK, and a modern kitchen with a center island and modern appliances would be possible. Higher ceilings, more open space and a sound system throughout the house could be added, as well as outlets for computers in convenient places. The children could design their own bedrooms, and if the policy had “appurtenant structures” coverage and there was one on the property before the fire, a “granny flat” or separate office or studio could be designed and constructed.
Alternatively, if the homeowner was preparing to downsize as the children were growing up and leaving to form their own families, the house could be downsized on the footprint, and the reduced cost might be redirected to increased amenities in the new house that fit the changing lifestyle of the owners.
Some insurers want to be involved in every step of the rebuild process, but others could not care less how the homeowner rebuilds as long as the cost does not increase beyond what the insurer is willing to pay. Also, contents coverage is based on the value of what the homeowner lost and not what they choose to purchase for the future. It is possible to negotiate with the insurer here as to what contents repurchases they will pay for and what they will not. Some insurers only care about the cost, and not what the homeowner does with the money. As the homeowners grow older, what they want inside their house may change and this is the opportunity to make those changes.
Loss of use coverage
Likewise, for loss of use coverage, the homeowner should be entitled to the cost of renting a home similar to the one destroyed for the amount of time allowed by the policy (usually two years, now increased to three years by California law) up the the policy limits (if there are any). If an agreement is reached with the insurer to pay a lump sum for loss of use coverage, the insured might later decide to move from that rental home to a trailer on the property, or move in with relatives, and use the loss of use coverage to add to the amount of insurance proceeds available for the rebuild.
Conclusion
Although the present is an incredibly traumatic time for a family who lost their home and many of their treasured possessions, after the rebuild process is completed, many of the “burnouts” (as they are somewhat cruelly called by others) will look back at this difficult time as a period of life reassessment and spiritual renewal. The negatives they are now experiencing will end up becoming positive aspects of their lives.
Ted Vaill