Looking to avoid a public relations debacle like the one that still haunts the industry over Hurricane Katrina claims, insurer groups briefed Congressional staffers last week on their swift response to October's California wildfires. The battle for public opinion might still be uphill, however, with at least one major newspaper reporting widespread underinsurance.

On the same day insurance industry leaders met in Washington to trumpet their wildfire performance, a New York Times story reported that "as many as 40 percent of homeowners statewide lack enough insurance to cover their home-replacement costs," citing California Department of Insurance statistics.

In that story, the state's former insurance commissioner and longtime critic, California Lt. Gov. John Garamendi, said he believes insurers are at fault.

On Capitol Hill, the heads of the major insurance company groups spoke of the industry's swift response and the sacrifices made by insurance professionals to help policyholders begin rebuilding.

Insurance Information Institute President Robert P. Hartwig noted that although the fires were indeed a disaster, with an estimated insured loss of $1.6 billion, the catastrophe involved was relatively small in comparison with what the industry has dealt with before. "It is within the realm of expectation," he said.

While the estimated loss would make this the second most expensive fire disaster in recent history, Mr. Hartwig noted that fires accounted for only 2.2 percent of catastrophe losses during the past 20 years, and that the October fires was not among even the top-10 most expensive U.S. catastrophes overall.

Furthermore, California is a strong market for homeowners insurance, he said, with rate decreases having been filed and approved for most major insurers.

Additionally, Mr. Hartwig noted the state's insurer of last resort, the FAIR Plan, covers only 1-to-1.5 percent of the market, and the number of FAIR Plan policies has been shrinking in high-risk areas as private insurers offer coverage.

Marc Racicot, president and chief executive officer of the American Insurance Association, said the state's second-largest insurer, Farmers, had numerous agents and adjusters, a mobile claims center "and even its CEO on the scene."

He said other companies have gone beyond their legal requirements to pay claims. Employees at Safeco donated $250,000 to help the rebuilding effort, and Fireman's Fund has said it will offer policyholders the choice to rebuild their homes in a more environmentally friendly way at no extra cost, he noted.

Mr. Racicot also said The Hartford announced it will not cancel policies for lapses due to the fires. "Helping others is why the insurance industry exists," he said.

David Sampson, president and CEO of the Property Casualty Insurers Association of America, said homeowners should not be concerned their filing of a claim will make their insurer more likely to nonrenew them.

Since earlier fires, the state has enacted a law barring insurers from cancelling a policy prior to reconstruction and requires a renewal offer be made following a disaster.

Additionally, Mr. Racicot said insurers will pay replacement costs to rebuild a home without deduction for physical depreciation, and under the state of emergency declaration by Gov. Arnold Schwarzenegger, insurers will provide coverage for living expenses for up to two years.

"It is during these times of tragic loss that the value of our industry and the financial safety net we provide consumers, businesses and local economies becomes clear," he said.

National Association of Mutual Insurance Companies President Chuck Chamness spoke of the ground-level work done by insurance company employees to help clients, including an agent that "cut short a once-in-a-lifetime trip to Jerusalem."

He mentioned another he said had donated their RV so the policyholders of a smaller company would have a place to meet and work with their agent.

The insurance industry, he said, is working to fund research that will lead to better, more secure homes to help avoid disasters in the future. "The science underwritten by the insurance industry now will help everyone understand how to avoid more damages later," he said.

However, spoiling the mood was the Nov. 13 Times article, which highlighted the stories of two families whose homes were destroyed by the fires and are now facing steep construction costs that may outpace their insurance policy limits--on top of the realization that they lacked coverage for the contents of their homes.

Mr. Garamendi was mentioned as among those who blame insurers for the widespread insufficient coverage. The article mentioned comments he made earlier this year decrying the "lack of clarity" in policy language, and his belief that in some cases insurers and their agents "were giving bad information to the consumers."

At an Oct. 24 press conference with Gov. Schwarzenegger, Lt. Gov. Garamendi said the state would keep its eye on the industry. In the aftermath of the fires, he said, "rebuilding mechanisms" were in place "with the insurance industry playing its appropriate role, and the state watching carefully that they do so."

Mr. Hartwig told the Times the idea that insurers are responsible for the problem "is a figment of John Garamendi's political imagination," adding there is no evidence to support the argument and "no report from any state agency that suggests that's the case."