RANCHO BERNARDO, Calif., July 14, 2008
Allstate Accused Of Leaving Homeowners Dry
Calif. Homeowners Say They Were Misled Into Being Underinsured - And Weren't In "Good Hands"
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Play CBS Video Video Underinsured With Allstate After having their homes reduced to ash, California homeowners are finding that insurance giant Allstate had underinsured their homes -- making rebuilding a near impossibility. Sandra Hughes reports.
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A California resident wets down a roof in May 2008 as brush fires surrounded the home. With reports of insurers such as Allstate leaving homeowners stranded, there's increased reason for homeowners in fire zones to worry. (AP/Florida Today, Craig Rubadoux)
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Patricia Bennett’s Rancho Bernardo home was demolished by a wildfire last year. But they were delivered a shock when told they didn't have enough insurance to rebuild. (CBS)
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Photo Essay California Fires Persist Crews across state strain to cover hundreds of blazes. More than 1,000 square miles burned.
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Photo Essay Fires Char California Stretched thin, firefighters forced to strategically choose which ones to battle.
"So many treasures that are gone," Patricia said.
But since they were insured with the "good hands" of Allstate, they thought they’d be able to rebuild quickly, CBS News correspondent Sandra Hughes reports.
"When the demolition crew told us and said, 'you are underinsured,' I said how can we be? We called a year ago to make sure this would not ever happen to us," she said.
Although Allstate has paid the policy limits, the Bennetts say they are still going to be $150,000 short in re-buiding their lives.
And they are not alone. To rebuild their home, Mark Emery and Jeanette Stratton will have to dig deep.
“We really didn't want to have to dig into our savings just to rebuild the way it was before,” Emery said.
They contacted their agent to make sure their policy would reflect recent upgrades.
"I called them and told them about the recent changes to make sure that we had the best policy that they had," Emery said.
But their "deluxe plus homeowners policy" has so far only been worth a check for $234,000 - and local contractors say they need at least $500,000 to rebuild.
Allstate may pay them up to an additional 50 percent "extended replacement cost," which would add up to another $117,000. But they are still $150,000 short.
"We were grossly underinsured, as apparently everybody has been," Emery said.
Consumer advocates claim there is a reason insurance companies want to keep your policy limits and premiums low.
"If they tell you what it really will cost to insure you home you're gonna say, well I'll get back to you. What they'd rather do is low ball. And the person says okay because they trust their agent," said Amy Bach of Policy Holders United.
Fire victims are realizing they are not unique. Time and again, Allstate is accused of leaving customers uninsured and unable to rebuild after disasters.
Allstate has been sued in California, Florida and Texas by policy holders claiming the company uses an unfair business model.
After Hurricane Katrina, Allstate was fined for dropping policy holders illegally. The California Department of Insurance fined Allstate after the Oakland fires of 1991.
"And why did they get fined?" Bach said. "Because so many people were underinsured with Allstate."
Between 1987 and 1996, Allstate paid consumers 73 cents for every dollar on the premium. That dropped to 59 cents between 1997 and 2006, a 19 percent in the value of Allstate's product to consumers. In 2006, the company hit a record profit of $4.9 billion.
Allstate's Bob Daniels says its customers are more valued than profit.
"We work with the customer all the way through the process to make sure we are doing everything we can so that they get the full value of their policy," he said.
According to Daniels, of the 200 homes covered by Allstate that were destroyed in last year's wildfires, every homeowner has been paid something - often up to the policy limits.
"Well the fact that we were able to give them their checks within two to four weeks, we are very proud of," he said.
But the homeowners CBS News talked to say the policy limits aren't enough.
"I'm just getting my second wind," said Jeanette Stratton.
Good thing - this could be a battle that rages well into the next fire season.
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See all 94 CommentsYou are paid for damages depending on how much coverage you had- You are stupid to expect a company to pay more than they are entitled to pay. THIS APPLIES TO ALL INSURANCE COMPANIES!!! NOT JUST ALLSTATE.
A last word to those who say insurance companies should be non-profit: Would you work for no pay? It takes people fill the many roles in the insurance business. These are MORAL, HARD WORKING PEOPLE WHO CARE ABOUT THEIR CUSTOMERS. They deserve some compensation for their work.
Allstate is a great company, my agent could not be any more helpful and I have always been covered and kept IN GOOD HANDS.
For one, there is no such thing as full value replacement coverage. YOU know the value of YOUR HOME and YOU are responsible for making sure that YOU have it covered for the right amount. If you are going to have a half million dollar house, look at the policy declarations you get every year from your insurance carrier and make sure the dwelling coverage is adequate. Some people lower their coverage in order to lower their premiums- if you can''t afford to insure a $500K house, don''t build one. If you do anyway, IT IS YOUR FAULT for not paying for adequate coverage. Stop pointing fingers and blaming others! Be an adult- accept the fact that its your fault you weren''t covered for enough, and rebuild on a smaller scale. ANY insurance AGENT with ANY COMPANY, Allstate included, is more than happy to raise your coverage limits to any amount you see fit. Now when your insurance company covers your house for more, they are taking on more of your risk. Therefore, you will have to compensate them for that.
What CBS always does is give a one sided look at things... what about the thousands of policy holders that were more than satsfied? What about the other insurance carriers? I guess Allstate doesn''t give CBS enough advertising dollars or they would have never run a piece like this.
AllState is a business. They''re trying to make as much money as possible like all of them. Duh. They''re not out to do anyone any favors. The "Good Hands" b.s. is just advertising. Like Ford saying, "Quality is job 1."
California goes through the "wildfire" drill year after year after year. I remember seeing them when we lived out there & that was 30 years ago.
The fact is that most homeowners insurance claims are not anywhere near the limits of the policy. It would be suicide for Allstate to not collect the premiums that they thought were commensurate with the risk involved.
There were other Allstate policyholders interviewd that were very satisfied with the claim service they received from Allstate--didn''t see them did you?
CBS Evening News--the network news nobody watches anymore. Biased sensationalism is designed to grab more viewers.
If you are an adult who owns a house...get yourself the coverage you think you need when talking to your insurer. You''re the one in control of that. Blame yourself if you''re underinsured
http://www.justice.org/docs/TenWorstInsuranceCompanies.pdf
While the article deals mostly with auto accidents or health care, you need to consider the companies as a whole.
They will not act one way for one type of policy (auto insurance) and totally different for another type of policy (homeowner). They will cut, slash, burn across the board.
This is a good reason to regulate insurance, big pharma, banking, the pets of the GWB administration and the GOP. These 3 industries are big contributors to lobbiests and PACs.
Get them out of DC NOW!!!
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See all 94 Comments