Ariz. Fire Victims to File Lawsuits Against Insurers

More than 70 families whose homes were destroyed in the 2003 Mt. Lemmon/Aspen Fire will reportedly file lawsuits on May 24 in Tucson against 16 insurance companies.

The families claim their homes were deliberately underinsured making it impossible for them to rebuild. The actions come three weeks before the two-year anniversary of the fire.

Named in the lawsuits are AARP/Hartford, Allied/AMCO, Allstate, American Commerce (AAA), American Family, American Reliable, Armed Forces Insurance Exchange, Auto Owners, Central Mutual, County Financial, Hartford Fire Insurance/Mahoney Group, Liberty Mutual, Safeco, Shelby Vesta Insurance Company, State Farm and USAA.

“We’re facing an underinsurance epidemic in Tucson and in most of the United States,” said Brian Kabateck, an attorney who represents the plaintiffs. Kabateck, a partner with Kabateck Brown Kellner LLP, represents homeowners and consumers throughout the country in insurance disputes and consumer class actions.

The Mt. Lemmon/Aspen fire began on June 17, 2003 and consumed more than 85,000 acres. It destroyed 320 of the 450 structures on the mountain. Many of these structures were single-family homes and cabins that belonged to families for decades.

“When many of these families contacted their insurance companies, they found they didn’t have enough coverage to rebuild their homes,” said Kabateck. “Instead of the going rate of $200 a square foot to rebuild in Mt. Lemmon, many of the policies were at $75 or $100. Before the fire, many homeowners were repeatedly reassured by their agents that they had enough insurance in case of fire. A fire a year earlier prompted some of the plaintiffs to call their insurance carriers to make sure their coverage was sufficient. Again, they were told that they were fully covered. Others were told that there was a moratorium on writing additional insurance, when in fact, the moratorium had been lifted before the Aspen fire. Under Arizona law, insurance agents have a duty of care to ensure clients are properly insured. The plaintiffs believe this duty of care was breached. Several insurance companies have already reached confidential settlements with their policyholders.”

Kabateck said that insurance companies underinsure customers to stay competitive. “They do not want to price their premiums higher than their competitors,” said Kabateck. “They’ll shave coverage to keep yearly premiums low regardless of whether the policyholder has adequate coverage.”

Only a small percentage of insurance claims are “total loss” claims according to Kabateck, but they represent the largest potential payouts by insurers. “It is in the insurers’ best interest to write policies for less than total loss coverage. Otherwise, they could be hit with hundreds of millions of dollars in claim payouts when a catastrophe, such as a fire, occurs,” said Kabateck.

With the two-year anniversary of the Aspen fire approaching, Kabateck warned that policyholders may be facing a statute of limitations deadline to file timely claims against their insurance company.

“With the fire season right around the corner, now is a good time for homeowners to review their policies to ensure their homes are sufficiently covered,” said Kabateck. “It’s better to find out now instead of after your house has burned to the ground.”