Wildfire victims should be able to look to CDI for protection

The 2018 California wildfires destroyed some 22,000 structures, including nearly the entire town of Paradise. Most of the ensuing insurance claims are being handled by hundreds of out-of-state adjusters who are not licensed in California and are working here unlawfully. Those adjusters commonly lack adequate training and frequently misinform fire victims about their legal rights. The same thing happened after California's 2017 wildfires. This malfeasance is rooted in a massive deception by the insurance industry -- which the California Department of Insurance (CDI) has been allowing to continue unchecked.

Out-of-state adjusters are exempt from the Insurance Code's licensing requirements if employed regularly and exclusively by a licensed adjusting company. During 2017-2018, in filings with CDI, several dozen nationwide adjusting companies deceptively reported some 6,000 unlicensed out-of-state adjusters as being exempt employees. The truth is that most of those adjusters are not employees. They are independent contractors who work without supervision and are largely unschooled in California insurance law, which is far more protective of policyholders than in most other states.

I discovered this massive deception in late 2017 when I participated in pro bono counseling of fire victims on insurance issues. I filed what's called a "consumer complaint" with then-Insurance Commissioner Dave Jones. I expected him to respond and promptly take action. After all, according to CDI's website, its mission is to protect insurance consumers and one of its functions is to resolve consumer complaints.

To my surprise, Jones ignored my consumer complaint -- and the massive deception. In doing so, he violated statutory mandates that he investigate deceptive insurance industry practices, take action on consumer complaints, and give notice of the action taken. I sued him and CDI, seeking a court order requiring compliance with those statutory mandates. (See "Lawyer sues insurance commissioner over out-of-state adjusters handling fire claims," Daily Journal, Feb. 8, 2018.)

The litigation has dragged on for a year with the defendants yet to file an answer. A demurrer to my second amended complaint will be heard on Wednesday in San Francisco County Superior Court.

Fire victims and their advocates would surely be shocked to learn of the arguments that Jones and CDI have made in an effort to evade a judgment on the merits. They have argued that they may:

• refuse to respond to a consumer complaint.

• refuse to take any action on a consumer complaint.

• take action but refuse to tell the complainant what action was taken.

• refuse to investigate unfair or deceptive insurance industry practices despite reason to believe such practices occurred.

• disregard a decades-old San Francisco Superior Court ruling that these are mandatory statutory duties.

Wildfire victims should be able to look to CDI for protection from unfair and deceptive insurance industry practices by filing consumer complaints as an alternative to costly litigation. CDI's website encourages them to do so. But what's the point of filing a consumer complaint if the commissioner insists he is free to ignore it? What's the use of legal safeguards against incompetent unlicensed adjusters if their adjusting companies can evade those safeguards by deceiving CDI -- with impunity -- about their employment status?

I recently spent two days in Chico counseling Paradise wildfire policyholders. I heard the same complaints as in 2017 about unlicensed out-of-state adjusters, working here illegally, who are misinforming policyholders about their rights under California law. One young woman especially stands out. A homeowner for just a few months, she had recently given birth and started a new job. In tears, she recounted how her unlicensed out-of-state adjuster had told her that she is required to go through the arduous process of rebuilding her destroyed home despite her preference to buy a replacement home and that she will forfeit her payments for temporary living expenses if she uses insurance proceeds to pay off her existing mortgage. I assured her that her adjuster is wrong on both points.

We now have a new Insurance Commissioner -- Ricardo Lara. One of his first official acts last month was to file a demurrer to my second amended complaint. The demurrer parrots Jones's previous arguments. It reminds me of the Who's classic rock lyrics: "Meet the new boss. Same as the old boss."

Does Commissioner Lara really want to arrogate a right to ignore consumer complaints about wildfire claims-handling and countenance the insurance industry's deceptive evasion of California's adjuster licensing laws? Perhaps he just hasn't had enough time yet to settle into the job, put a stop to the deception, and embrace his statutory duties.