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Twenty-six years ago next week, one of the worst residential fires in U.S. history wiped out 2,843 single-family homes and 437 apartments as it swept across the Oakland, California, hills.

In 18 hours, the wildfire left 25 people dead and caused $1.5 billion in damage.

Just a couple of days after the fire, 75-year old George Boero, 1000watt co-founder Brian Boero’s grandfather, left a note in his next door neighbor’s mailbox declaring his plans to rebuild the house that he and his gritty wife Lu built in the 1950s and lost in the 1991 fire.

The couple did just that, and they were some of the first to move back into the charred East Bay neighborhood, which has been completely rebuilt to become one of the hottest real estate markets in the San Francisco Bay Area.

Destroyed homes left in the wake of the Oakland Hills firestorm. Photo courtesy of Wikimedia Commons.

In the face of disaster, human resilience and determination to move forward is a marvel to watch.

As a journalist, I wrote stories about post-disaster rebuilding in places like Oakland and San Francisco after the 1989 Loma Prieta earthquake; Los Angeles after the 1994 Northridge earthquake; and visited Phuket after the 2004 Tsunami in Thailand.

I was always struck by people’s fierce will to rebuild. In Thailand, old people and young children with buckets and shovels removed debris one brick at a time as they prepared their land for reconstructing new huts and homes.

Economist Claude Gruen predicted that Oakland would come back stronger with a safer housing stock, landscaped property, architect designed homes and new sidewalks, roads and infrastructure. He was right.

Indeed, after many tears, people sort through their broken lives. Then, they charge ahead to resuscitate a new version of their old homes and communities. Governments, non-profits and relief efforts work tirelessly to help, but at some point people are left to fend for themselves.

And then comes the dark side of the recovery.

Recalescent insurance companies sometimes fall short of their obligations. They put on a benevolent community face when the press is covering the disaster. But when journalists move onto the next big story, some insurers begin a negotiation with their customers to minimize the payouts on legitimate claims. While they should behave like partners, insurers can become antagonists with their own customers.

Back in the day, the first thing a big insurance company did after a disaster was size up its damages. It then worked backwards from that number to minimize its losses that might exceed its financial targets. That often meant nickel-and-diming customers to squeeze whatever it could into its financial scheme.

For many property victims I talked to over the years, the bureaucratic anguish of negotiating with an insurance adjuster can be as stressful as the natural disaster. Endless requests for paperwork and documentation slows down the payouts. Some homeowners are often so worn down that they negotiate smaller settlements than they should.

While legitimately on the lookout for fraud or shaky claims, the adjusters and their companies can overreact and treat everyday customers more like criminals than clients.

An exception to this sordid history was the Oakland fire. With a high concentration of outspoken lawyers and activists, area residents held the insurance companies to task and persuaded municipal governments to forgo property taxes and offer other generous benefits.

It was a blueprint for other communities to follow. Volunteerism to help disaster victims must turn into activism if insurance companies and governments are to be held accountable.

Dadeline Mobile Home Park damage after Hurricane Andrew. Credit: NOAA/Flickr/Public Domain

If Oakland was a blueprint, Hurricane Andrew, which hit the Florida coast one year later, was a case study for a post-disaster insurance catastrophe.

Dubbed a “mega-catastrophe” by the insurance industry like Hurricane Katrina and 9/11, Andrew hit Southern Florida in August of 1992. It was the costliest natural disaster in U.S. history before Katrina. The hurricane wiped out whole communities. Eleven property insurers went under due to Hurricane Andrew.

Claims far exceeded the insurance industry’s ability to honor its obligations and those still in business played hard ball with its customers.

That insurance mess caused the industry to change how it thought about disaster coverage, including requiring large deductibles on future policies. But it didn’t stop dubious behavior.

National Public Radio published an investigative piece last year on the controversy surrounding the recovery and insurance company antics after Hurricane Sandy in the Northeast.

Flood insurance is a public program, administered by private insurance companies who were accused by NPR of paying out as little as possible to save on losses. All the while, the fee-based insurance companies made off with an estimated $400 million in profits, according to NPR.

In the aftermath of four major natural disasters in the last month — Houston, Puerto Rico, South Florida and now Napa and Sonoma — plans to rebuild have already begun. And insurance companies are wringing their hands, plotting their next moves.

The real estate industry has been a dutiful volunteer force, helping these communities withstand the pain of epic disasters. But now they should turn into activists to help their neighbors figure out the insurance and rebuilding roadmap ahead.

The real work begins.

Email Brad Inman

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