Insurance To Rescue? Maybe Not ...

In the wake of this week's devastating wildfires, thousands of Californians are faced with rebuilding not only their homes, but their lives.

And many, if not most, of them will depend on insurance money to get started. But, as CBS News Correspondent Sandra Hughes reports, they may not get all they hoped for or expected.

Dan Stover and his insurance adjuster are trying to reconstruct the last dozen years of his life from the ashes. It's a painstaking process that has its pitfalls.

"I don't know how they can do this for a 1,000 or 1,500 people," Stover said.

Sometimes they don't. After the 1994 Northridge earthquake, homeowners learned their policies didn't always cover everything.

"What the insurance companies were doing then is slow-pay and no-pay and low-balling the claims," said California Insurance Commissioner John Garamendi.

Underestimating values to the tune of $250 million, almost every major insurer was found to have been involved.

Before these blazes, California was already in an insurance crunch. Homeowners found themselves unable to get insurance after being black-listed for making small claims like water damage, or even just inquiring into claims. State farm for a time even stopped writing new policies.

But its not just in California that insurance companies have been accused of foot-dragging or using disasters to raise premiums or cancel policies.

On the day Hurricane Andrew blew into southern Florida, the major insurer, A.I.G. sent out a memo saying: "This is an opportunity to get price increases now."

"The insurance industry is in the position of power, and when you have industry in position of power you have to have a policing present, regulators, commissioner with watchful eye that they don't cheat us," said Doug Heller of the Foundation for Taxpayer Rights.

Insurance Commissioner Garamendi has already made his presence known—warning insurers he's watching. At least one insurance company based in southern California has already vowed to not raise premiums.

"We are in the business to deal with disasters. This is part of the insurance business," said Jeff Beyer of Farmers Insurance.

But if history is any indicator there are many southern California homeowners who could be burned twice by this disaster.