There have been reports of victims of the Los Angeles wildfires having their homeowner’s insurance claims denied by their insurer if the home is owned by a trust, but the trust is not properly listed in the insurance policy.
This is happening to individuals who have owned their homes for years and at some point created a living trust and put all of their assets, including their home, into it.
In other instances “trust-fund babies” are living in homes owned by trusts created by their parents or grandparents. They may have purchased home insurance but, if they failed to list the trust as a named insured on their policy, they too can face claims denials.
In both of the above cases, the insurer would still be required to pay for damage to personal property inside the home that is not listed in the trust.
When a home is owned by a trust, insurance companies may deny claims if the trust is not explicitly listed on the homeowner’s policy. They argue that the trust, as the legal owner of the property, must be named as an additional insured party or endorsee on the policy to qualify for coverage.
This leaves the homeowner in a difficult position, even though they have been diligently paying premiums.What to do if your claim is denied
If your insurance claim has been denied because your home is owned by a trust, here are steps you can take:
- Understand the denial: Review the denial letter and identify the insurer's reasoning. Look for specific references to the trust or ownership.
- File an appeal: Many insurers have an internal appeals process for denied claims. Submit evidence, such as proof of premium payments, your role as trustee, and documents showing the trust's ownership of the home.
- Contact the state regulator: You can file a complaint with California's Department of Insurance, which will investigate potential unfair claims practices and assist in resolving disputes. Sometimes, informing the insurer you plan to file a complaint with the agency is enough for them to reverse their decision.
- Consult an attorney: A lawyer experienced in insurance or estate law can determine if the denial violates California's good-faith laws, which require insurers to honor valid claims unless a policyholder has materially misrepresented their situation.
- Negotiate or litigate: If the insurer refuses to reverse the denial, legal action may be necessary. A court can compel them to honor the claim if the denial was unjustified.
Preventing future issues
If your home is in a trust but your insurance policy hasn’t been updated, take these steps to avoid potential coverage gaps:
- Contact us and request that the trust be listed as an additional insured or endorsee on your policy.
- Update your policy to ensure both the structure and personal property are covered under the updated policy. Many carriers have specific endorsements for properties held in trusts.
