Insurers Drop Homeowners, Leaving Fire Victims in the Lurch
California’s home insurance market was already in turmoil before the recent devastating wildfires in Los Angeles County. Now, the blazes have intensified the crisis, leaving many homeowners struggling to secure or maintain coverage.
The charred remains of a home
Prior to the fires, several insurance companies had already decided not to renew thousands of home insurance policies in fire-prone areas such as Pacific Palisades and Altadena. Rising costs and cancellations left many fire victims without sufficient resources to cover their losses. This situation exemplifies a deepening crisis in California’s property insurance market.
Francis Bischetti, a homeowner in Pacific Palisades, experienced a dramatic increase in his annual premium. His policy, purchased through Farmers Insurance, was set to increase from $4,500 to $18,000—an amount he simply couldn’t afford. He was also unable to obtain coverage through the California FAIR Plan, which offers fewer benefits, because he would have to remove trees around his roof to lower fire risk, which was also too expensive.
As a result, Bischetti decided to forgo insurance altogether, a risky choice in a region susceptible to wildfires. He believed irrigating his property year-round might provide adequate protection. Unfortunately, his home was destroyed in the fires, along with thousands of others, leaving him with nothing.
Pacific Palisades, CA – January 07: The Palisades fire destroys a home
Many homeowners in hillside communities, like Pacific Palisades and Altadena, have faced similar challenges. Insurers, aiming to reduce their exposure to catastrophic wildfire claims, have either raised premiums significantly or opted not to renew policies. Numerous fire victims reported their policies were dropped last year.
The fires, anticipated to be among the costliest natural disasters in U.S. history, have only worsened the already fragile state of the home insurance market. The crisis has raised questions about rebuilding and cleanup timelines.
State Farm General, the state’s biggest home insurer, announced it would not renew 30,000 homeowner and condominium policies, including 1,626 in Pacific Palisades. Other insurers have also pulled back. Chubb and its subsidiaries halted new policies for high-value homes with increased wildfire risk in 2021. Allstate stopped new policies in 2022, Tokio Marine America Insurance Co. and its subsidiary Trans Pacific Insurance Co. withdrew from the state last year, although Mercury Insurance offered to take over their customers.
Liberty Mutual was recently sued by a homeowner who claimed the insurer dropped her based on a false claim of roof mold damage. The inability to secure coverage is evident in the increasing number of policies handled by California’s FAIR Plan. As of September, the FAIR Plan held approximately 452,000 policies, a substantial increase from just over 203,000 four years ago.
Rick Dinger, president of Crescenta Valley Insurance, an independent brokerage in Glendale, described the situation as “a train wreck coming down the track.”
Altadena, CA, Sunday, January 26, 2025 – Homes located west of N. Fair Oaks lay in ruins less than two weeks after the Eaton Fire devastated the area.
Peggy Holter, a retired television journalist, lost her Pacific Palisades condo in the fires. State Farm did not renew her condo insurance, citing her roof’s condition. The main issue for Holter is the uncertainty of rebuilding, especially since the homeowners association had a master policy from the FAIR Plan, which only offered limited coverage per unit, far less than the condos’ market value.
Matt Knight, a Covina elementary school teacher, faced similar difficulties. He was informed by Safeco Insurance that his policy would not be renewed due to a tree overhanging his garage. Even after taking care of the issue, he faced additional demands for repairs, preventing him from obtaining insurance at an affordable rate. He had to spend $30,000 on the repairs and still couldn’t get insurance.
Knight eventually secured coverage with Aegis Insurance, but the coverage was significantly underinsured. His home was valued at over $1 million, but the policy offered coverage of less than $300,000, which would not cover the reconstruction of his home.
These stories highlight the significant challenges California homeowners face in securing adequate insurance coverage, especially in areas at high risk of wildfires. The impact of these fires extends to personal lives and the economic well-being of entire communities, making this a pressing issue.
