First Party Property Losses

First Party Property Losses

Post 4722

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Every claim begins with receipt of the Notice Of Loss

A Notice of Loss is a written or oral report to the insurer that the insured has incurred a loss. It advises the insurer that it has incurred a loss due, with respect to the insured, a wildfire to one or more properties the risk of loss of which was insured. The loss notice will advise the insurer:

The name, address and telephone number and/or email address of the person most knowledgeable.
The date and time of the loss.
The location(s) of the loss
The cause of the loss e.g., wildfire, flood, earthquake, vandalism, or major theft.

After the insurer receives a Notice of Loss the insurer is required by the custom and practice of professional claims handling and the requirements of the California Fair Claims Settlement Practices statute and Regulations to enforce the statute, the insurer must acknowledge receipt of the Notice of Loss in writing immediately but in no event more than 15 calendar days.

The acknowledgement letter must also include advice to the insured on the coverage available. To properly acknowledge the notice of loss the claims person must obtain a complete copy of the policy, read and analyze the policy and create a summary of the coverages available.

California Fair Claims Settlement Practice Regulations Section 2695.4, for example,  provides “Every insurer shall disclose to a first party claimant or beneficiary, all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim presented by the claimant. When additional benefits might reasonably be payable under an insured’s policy upon receipt of additional proofs of claim, the insurer shall immediately communicate this fact to the insured and cooperate with and assist the insured in determining the extent of the insurer’s additional liability.”

The letter should include, as a bare minimum, information like:

the limits of liability of the policy,
any deductibles or self-insured retentions,
advice concerning any specific exclusions or conditions that apply to the facts established by the notice of loss,
a written notice that a proof of loss is required within 60-days of the letter with an attached proof of loss form,
a requirement for the production of necessary documents,
a reservation of rights (if called for), and
any other information the insured needs to fulfill the conditions of the policy.

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The letter should include, because a wildfire’s damages are almost always serious, and realize that to an individual any claim is serious, and should include confirmation by the claims person of an appointment to meet with the insured to view the damaged property(ies).

The inspection should be as soon as possible but no later than 15 calendar days after the notice of loss. The inspection should include the creation of a scope of loss. The scope of loss the claims person prepares should be written in the same form as a professional contractor that the claims person has determined is acceptable to a professional contractor. The adjuster should contact several reconstruction contractors who are willing to do reconstruction work for detail on the claims person’s scope. The adjuster must understand that standard prices in software like Xactimate will change in a catastrophe situation because of the shortage of people and materials available to repair structures.  The agreed scope of loss should include all damages incurred by the insured to real and personal property, equipment, stock, merchandise, inventory, appurtenant property, plants, trees, shrubs, etc.

The Scope of Loss

The scope of a major loss will often be recorded and later transcribed especially when there is major damage and multiple properties and types of property. The scope of a major loss can be multiple pages and supplemented with photos and videos of the loss location(s). The scope is not an estimate nor is it an adjustment, it is an outline of the damages that the insured and the adjuster agree the items that need to reach a later agreement after a thorough investigation the full amount of loss can be determined. The Scope of Loss is the beginning of the thorough investigation of the claim that is required to be commenced immediately but in no event more than 15 calendar days after the receipt of a notice of loss.

The Thorough Investigation

A thorough investigation is a thorough investigation is conducted for each claim sufficient to allow a determination of coverage, the liability of the insured, the nature and extent of damages, or the obligations of the insurer or surety. An investigation is not sufficient if the work of the claims handler is limited to a mere reading the policy and comparing it to a loss notice. Once a scope of loss is agreed it is the obligation of the insurer to obtain estimates from:

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construction experts to put a dollar amount on the structure losses.
If personal property is involved the scope details the property damaged or destroyed and once agreed obtain estimates from:

personal property or equipment experts
personal property values.
If there are time element losses once the scope of the loss is agreed the insured and insurer will work together with a CPA or forensic accountants to establish the extent to which time element losses have occurred.
Depending on the extent of the loss it is essential that the claims department work, preferably in person, in establishing a scope of loss.

The Proof of Claim

The claims person must then work closely with the insured to reach agreement as to the amount of loss and damage.

Once the insured presents a “proof of claim” as defined in the California Fair Claims Practices Regulations: “’Proof of claim’ means any evidence or documentation in the possession of the insurer, whether as a result of its having been submitted by the claimant or obtained by the insurer in the course of its investigation, that provides any evidence of the claim and that reasonably supports the magnitude or the amount of the claimed loss.” [Regulations, Section 2695.2 (s)]
A “proof of claim” is not a sworn statement in proof of loss required by almost all first-party property insurance policies as a condition precedent to indemnity.
Rather, it is something less than a proof of loss and, if the insurer wants a proof of loss, it must demand it in writing in accordance with the policy wording.
The insurer must still respond promptly (within the time limits set by the Regulations) to the proof of claim. Failure to do so would be an obvious and clear violation of the Regulations.
The claims person is not required to accept or reject the claim within 40 calendar days but must respond to the presentation of the proof of claim either accepting, rejecting or advising the insured/claimant that the insurer needs further investigation and time to respond to the proof of claim.
If investigation is needed to respond to the proof of claim it is necessary to repeat, every 30 days, an explanation why the insurer is unable to respond to the proof of claim and when it expects to be able to properly respond.
If the insurer agrees to the “proof of claim” the amount stated becomes undisputed and payment is required immediately but in no event more than 40 calendar days from the date the “proof of claim” becomes undisputed.
It is the obligation of the claims personnel to work to resolve the claim promptly and as soon as reasonably practicable.

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The “proof of claim” is a starting point from which the insurer and the insured can get a total resolution.
If they cannot agree the insured and the insurer have options to assist:

The insurer must advise the insured what additional information it needs to conclude the claim.
The Regulations require that the insurer advise the insured what is needed and how much time it will take them to resolve the claim(s).
The insurer is obligated to do so every 30 calendar days.

The Poof of Loss

Unlike the “proof of claim” the policy requires a proof of loss to resolve a claim. A “proof of loss” is usually a means of reciting the agreement between the insured and the insurer as to the amount of loss. If an agreement cannot be reached, once demanded, the insured must submit its proof of loss.

After the insured’s proof of loss is received the insurer must, immediately but no later than 30 calendar days after receipt, its agreement, disagreement, acceptance, or refusal of the proof of loss explaining in detail the reason why the proof of loss is not acceptable, what is needed to be acceptable, and how much time the insurer needs to resolve the claim(s). The insurer can require, as part of the proof of loss that the insured or its employees submit to an examination under oath. Once the transcripts are signed and delivered to the insurer it must respond to the full proof of loss immediately but in no event more than 30 calendar days.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.