Who Pays When Neighbor's Fire Spreads to Your Home

A home for sale in Tooele, Utah, went up in flames last week, about two months after the family that owns it moved to Washington state. Its living room and roof were destroyed. Owner Ben Jackson, who watched online as his house burned, told local station KSTU that he blames his neighbor next door, where the fire reportedly started and where explosions were heard.

"I run lots of tools, use lots of solvents," said Rodney Wheeler, the son of that property's owner. "People always have more things plugged into the walls and whatnot than they're ever aware of. ..." Wheeler told KSTU in Salt Lake City, adding, "But I don't know. It could be a number of things."

Assistant Fire Chief Bucky Whitehouse of the Tooele Fire Department, said the cause of the fire is unclear, but several vehicles, including all-terrain vehicles, exploded and the fire spread to the Jackson home next door.

Jackson told KSTU that he'd complained to the city for years about his neighbor's property being a fire hazard, telling Tooele officials that "there was flammable material in their yard, that flammable material, specifically gasoline, was leaking into my yard." Jackson added that he still has to pay a mortgage on a house that he now can't sell.

Of course it can help to have homeowners insurance in such cases. Although it can't pay the mortgage, it can pay to rebuild or restore a home after a fire. (A restoration company reportedly is working on Jackson's home.) Depending on the terms of the policy, fire insurance or a clause for fire damage coverage in your regular policy may pay out based on the actual value of the property after the fire, or it may pay out the replacement value for rebuilding the structure.

If your home catches fire due to your neighbor's negligence, your homeowner's insurance should foot your bill but will still likely go after your neighbor to recover damages. Separately, you might sue the neighbor based on that negligence -- to recover any out-of-pocket expenses, such as an insurance deductible. And if you lack insurance, you can start by seeking payment through your neighbor's insurance, if he or she has it.

In April, a retired Milltown, Mont., man lost his 100-year-old two-story home after a fire at a neighbor's house spread to his. He's pursuing an insurance payout from the neighbor's insurance. "I'm just so devastated. I've lost everything -- 30 years I've lived in that house," Harry Higgs told a local newspaper. He'd let his own homeowner's insurance lapse after his retirement in order to stretch his $800-a-month in income. Higgs told the Missoulian that he even lost up to $80,000 in antiques dating back to his grandmother's time.

Getting insurance from a neighbor's policy might not be an easy feat, however, even if the neighbor is responsible for the damage. It reportedly took nearly seven years of negotiation and litigation for Attorney Henry Lung of Minneola, N.Y., to win a property damage arbitration award of $99,500 for his clients, who had a complete loss of their $150,000 home due to a fire caused by their "negligent" neighbor.

"The insurance company [initially] refused to pay my clients for the loss of their house, even though the official fire report clearly indicated that the fire had originated in the neighbor's house," said Lung on his law firm's blog. This is because the insurance company argued that the fire had been started by a tenant and not by the homeowners themselves. That tenant was their adult son. The arbitrator ultimately ruled in favor of Lung's clients, but deducted $51,000 from the value of the home because his clients had obtained that much by selling their home at salvage value. His clients had not gotten any payout from their own insurance because they had stopped making those payments.

Property owners who, in fact, have home insurance still should check with their insurance companies to see if they have fire insurance coverage as a part of their homeowner's policy.