A new moratorium has been placed on dropping the homeowners insurance of policyholders who live near former California wildfire locations.

Insurance Commissioner Ricardo Lara announced the temporary ban on insurance companies’ ability to drop customers who live next to the perimeter of one of 16 wildfires that burned across California in October.

According to the Los Angeles Times, existing law prevents insurance companies from dropping the policies of homeowners who have lost their homes to wildfire damage, but Lara’s order expands the law to cover homeowners whose homes were threatened, but not lost to a wildfire.

The order affects upwards of 800,000 homeowners who live in ZIP codes near the Kincade Fire that ravaged Sonoma County, the Saddleridge fire that threatened Sylmar and the Tick fire that raged in Canyon Country.

The California Department of Insurance reported the number of complaints received by homeowners whose insurance companies dropped them tripled between 2010 and 2016 among those who live in urban areas nestled among woodlands. The number of complaints received regarding more expensive premiums went up by 217 percent in that same time frame.

Costs of Living in California Wildfire Locations

According to the New York Times, state officials said insurance companies in California paid out more money in claims than they received in premiums in 2017.

The New York Times spoke with Rex Frazier, president of the Personal Insurance Federation of California, who told the Times, “Year-over-year losses that the industry has seen are not sustainable for companies or good for homeowners.”

In the last five years, California has endured seven of the 10 most ravaging wildfires in the state’s history. In 2018, the town of Paradise was nearly annihilated when the Camp Fire scorched the town and surrounding area, leaving about 19,000 buildings in ashes and taking 85 lives as the fire relentlessly marched on.

The Department of Insurance reports more than $12 billion in insurance claims are due to the Camp Fire.

Oakland resident Sean Coffey told the New York Times he’s generally able to maintain a homeowners insurance policy for 10 months every year because companies tend to drop him every fall for no fault of his own. He now buys a fire insurance policy from the California Fair Access to Insurance Requirements Plan, which is an insurance pool the state requires be available to customers who are unable to maintain fire insurance independently. He said he buys a second policy to cover other typical homeowners’ risks.

Auditor Faults State, Counties for Failing to Prepare

California Auditor Elaine Howle was directed by the Joint Legislative Audit Committee to review how well prepared Butte, Sonoma and Venture counties were to protect vulnerable populations from a natural disaster, such as a wildfire.

She concluded the counties “have not adequately implemented best practices for protecting vulnerable populations, which may place their residents at greater risk of harm during future natural disasters.”

Among the accessibility and functional needs cited include disabilities, limited English language proficiency, transportation impediments and advanced age. The report concluded that the Federal Emergency Management Agency (FEMA) and the California Governor’s Office of Emergency Services (Cal OES) provided guidance to the counties, which failed to implement the necessary best practices.

At the same time, Howle’s audit faulted Cal OES for not following through with county governments to develop and review emergency assistance plans to best protect residents in California wildfire locations.

This article is not legal advice. It is presented
for informational purposes only.