Opting In or Out – Step by Step Guide for an Educated Decision
This guide is meant to help property owners decide whether to opt-in to government run debris removal programs or opt out of the government run programs and utilize their own insurance coverage to cover the debris removal program requirements. Shortly, each community wherein a fire has destroyed many structures will begin to hear about the government-sponsored/run debris removal program and property owners will then be asked to either opt-in or opt-out of that program. Our firm is based in far northern California, with offices in Humboldt/Del Norte and Redding, and we have now helped people go through the opt-in and opt-out, debris cleanup, soil testing, and documentation process for the Carr and Camp fires. Further, we’ve interviewed insurance agents, demolition contractors, city/county officials, and asbestos abatement contractors that worked on the Sonoma and Weed fires in order to learn and advise our clients accordingly. If you elect to ‘opt-in’ then you are electing to have the state manage the clean-up of your property; if you elect to ‘opt-out’ then you are choosing to utilize your insurance coverage to retain private contractors to manage the clean-up of your property yourself. Both options have pros and cons as explained below.
First off, why wouldn’t all homeowners simply opt-in: We imagine that’s the golden question in many communities these days. This seems to boil down to a few basic things – are you willing to give up control for the timing of when your property will be cleaned up and be available for re-building; do you have enough insurance coverage to opt-out and pay the fees to complete the debris removal program (see Step 1 below); and/or do you have any special features you want to preserve (i.e. retaining walls, stem walls, a given foundation) – for the most part if you opt-in all those things will be removed and you’ll be left with a clean lot. If you elect to opt-in then you are allowing the government a given amount of time (this amount of time is specific to each fire but was up to 36 months to inspect, test, remove, and clear wildfire-generated debris from properties damaged by the Camp Fire). That said, we do believe the majority of properties in the Camp Fire were cleaned up within 18 months. Some homeowners will be fortunate and be on the early portion of that process and will be able to get back to re-building sooner, but others will of course likely be on the back end. Many homeowners have heard the nightmare stories from Sonoma about governmental contractors over-excavating to get paid more, or homeowners opting-in only to receive a bill after the cleanup for costs beyond what the state-sponsored program covers; HOWEVER, we did not see either scenario play out in the Carr or Camp Fire debris removal programs and I would commend the state and local officials for the job they did in both communities. The steps outlined below should help you make an educated decision based upon your specific situation.
Step 1: Determine your insurance coverage. Obviously each policy can vary, but from our experience the coverage for debris removal is generally 5% of the replacement cost of the structure, at minimum. Many policies have an additional 5% that can be accessed from two additional insurance coverage categories and utilized for debris removal: 5% for the replacement cost of ‘other structures,’ can be accessed as well as 5% of personal property replacement. If you choose to opt-in, the specific portion of your insurance allocated for debris removal will have to be remitted to the State to cover at least a portion of the costs for debris removal that the state covers. We’ve written a previous article strictly on maximizing insurance coverage that can be found here: here
Step 2: Identify what on your property needs to be removed beyond your structure (i.e. boats, foundations, retaining walls, etc.) and review that list of items verse the list identifying what is eligible (or ineligible) to be removed by the state if you opt-in (this information will be specific to each fire’s cleanup program). One notable difference from the Carr and Camp Fire opt-in programs was that commercial structures were eligible for opting-in for the Camp Fire cleanup and note for the Carr Fire. IMPORTANT: if you have items that are ineligible to be removed under the state-sponsored program and you wish to opt-in, then you can utilize your insurance coverage for debris removal to FIRST remove the ineligible items and the remaining insurance coverage is all that the state will collect for removal of eligible items. This information was obtained from question 22 of the Butte County Recovers frequently asked questions and in our opinion could result in a substantial savings to homeowners if utilized correctly: here
Step 3: Now that you have an approximate coverage amount in mind, and know what is and isn’t eligible for debris removal then you can make an educated decision. We participated in many cleanups from the Carr and Camp fires from beginning to end for homeowners who opted out and thus we can approximate total costs: the scope of work is identical whether you opt-in or out so is just a matter of who is performing the work on your behalf. Very briefly, the scope of work for the debris removal and property clean-up consists of: asbestos survey, preparation of a work plan for debris removal, debris removal and disposal, soil scraping, soil confirmation sampling, and preparation and submittal of final documentation for approval. We present a few scenarios for insurance coverage below that are based upon our experience and opinions:
- Debris removal insurance coverage of less than $20,000: we recommend you opt-in to the state-sponsored program. The only caveat to that would be if your home was smaller and thus the debris removal cleanup would be significantly less. The costs for debris removal from a 4,500 square foot house are obviously much greater than for a 1,500 square foot home.
- Debris removal insurance coverage of $20,000-$50,000: we recommend you obtain a site specific quote from a demolition contractor/environmental consultant team that can give you an all-encompassing cost from beginning to end.
- Debris removal insurance coverage of $50,000 and above: we recommend you opt-out, but still obtain a site-specific quote as noted above to ensure your coverage is sufficient and there are not unforeseen complications. This assumes you would prefer to control the process and timing completely; if you happened to have a second home or you were in no hurry to re-build on your property, then opting-in is certainly the easier option.
As we have stated previously, our firm will almost certainly work on both the private side of the cleanup as well as the state/federally-funded side; therefore, we truly don’t have a bias either way so this guide is truly meant to serve as a tool so local families, and businesses can make educated decisions. Speaking of bias, in our opinion you'll see bias from both sides of the decision to opt-in or opt-out and it’s important to keep that in mind when making your decision. State and local governments likely wish for as many property owners to opt-in as possible because it makes the management of the debris removal cleanup process significantly easier. Large contracts are being issued to environmental contractors who will largely manage the testing, debris removal and documentation process for the state and local governments. This is completely understandable and I witnessed firsthand the difficulty for short staffed local environmental/building departments to try and manage a huge surge in workload that results from these catastrophes and having to not only coordinate with the state officials but also individual property owners who elect to opt-out. On the flip side of that argument, local contractors would likely like to see as many homeowners opt-out as possible so that they could work one on one with clients in a typical manner and not have to work through the bureaucracy of being a sub-consultant (at best) to a huge contracting firm. We believe this is understandable in terms of someone needs to perform the work and if the work can be done by local contractors as much as possible, then at least the money stays locally.
We sincerely hope everyone is beginning to recover from this disaster and that the process runs smoothly for each of you from here regardless of whether you opt-in or out.
Please feel free to contact us if you have further questions or need additional information.
Clay Guzi and the Guzi-West team
888-351-8189 x 5; firstname.lastname@example.org