Homeowners face insurance hurdles in aftermath of fire

Homeowners face insurance hurdles in aftermath of fire

Some insurers stop serving burn area; others raise premiums

By Travis Taborek travis@calaverasenterprise.com Apr 4, 2016

Mike Sweet, 65, of Rail Road Flat, was one of thousands in Calaveras County who evacuated his home in September when the Butte Fire tore through the county.

When Sweet returned to his undamaged home on Independence Road, a mile away from the burn area as the crow flies, he found in his mail a letter from Liberty Mutual informing him that it would not renew his homeowner’s insurance in November.

The reason given by the insurer: Sweet’s home is in a high-risk wildfire area.

Sweet was apprehensive enough about whether his home would still be there when he came back, and the letter could not have come at a worse time.

Sweet said he spoke to representatives at Liberty Mutual and managed to convince them to keep his house insured at a higher premium with an additional $372 for a total of $847 per year. Sweet’s home may be covered for now, but he said he is worried about whether he’ll still have homeowners’ insurance later this year.

“I’m curious come November if they’re going to offer a renewal this year,” Sweet said.

Sweet’s residence may still be covered by homeowners insurance for the present, but others in his situation have not been as fortunate.

Glenn Greenburg, director of media relations at Liberty Mutual, said that although Liberty Mutual is continuing to write homeowners policies in California, it has had to change its underwriting guidelines.

“Unfortunately, due to California’s significant wildfire exposure, we have taken the difficult but necessary step to responsibly manage our overall exposure to wildfires through underwriting decisions on new and renewal policies,” Greenburg said.

Liberty Mutual will continue to write homeowners insurance throughout the state, but each property will be reviewed to evaluate its potential exposure to wildfires, he said. “This long-term wildfire management strategy is not in response to the recent fires, and will safeguard our ability to pay policyholders’ homeowner claims,” Greenburg added.

Calaveras County Supervisor Cliff Edson said that he frequently gets calls from homeowners living in and around the Butte Fire burn area complaining about their difficulties in finding or keeping their homeowners insurance. Edson said that the most common cases he’s familiar with involve homeowners whose insurance companies declined to renew existing policies because of wildfire risk.

Those homeowners, he said, then switch to another insurance provider offering identical coverage at much higher premiums, often at thousands of dollars more per year.

Edson said that he also gets calls from homeowners who claim that some insurance companies are not writing new homeowners policies in Calaveras County.

“Rural areas like this are getting targeted by these insurance companies to not cover up here for various reasons,” Edson said. “It’s making it pretty impossible for people to live up here.”

Susan Brown, an insurance agent for Farmers Insurance’s local office in San Andreas, said that she receives several calls every month since the Butte Fire from county residents whose insurance companies stopped renewing their policies. Brown also said that a number of insurance companies have stopped writing homeowners’ policies in Calaveras County altogether.

Brown said that although Farmers Insurance has retained policies for homes around the burn area, she has had to raise premium rates for many of those properties.

Teresa Dahl, an agent for Gerard Insurance in San Andreas, said that the insurance carriers she works with, including Allied Insurance, Hartford and Safeco, have been “tightening the belt” in terms of writing new homeowner’s policies in the more rural areas of Calaveras County. Dahl said the carriers she works with have been slow to write new homeowner’s policies in Amador as well.

“Their underwriting guidelines have gotten more stringent and they’re not writing in these higher fire risk areas where there is a lack of fire protection,” Dahl said.

Madison Voss, press secretary for the California Department of Insurance, said that insurers make use of wildfire hazard risk models when forming the underwriting guidelines companies use to determine whether to renew a policy. These models make use of factors such as roof type, terrain and the area of defensible space around a property.

Voss said those models are sophisticated enough to assess wildfire risk between individual properties.

“They have models that can predict the risk between you and your neighbor and the house down the street,” Voss said.

Voss said that under California law, the department does not have the authority to restrict insurer’s ability to write policies in a particular area as long as their underwriting guidelines are consistent with those submitted to the department.

Brown said that wildfire risk scores, known as “fire lines,” include factors such as road access and slope, which puts properties in rural areas at a disadvantage.

“If you’re sitting in Sacramento, you probably don’t even know what a fire line is,” Brown said.

Brown said that one of the most important factors that insurers use to calculate wildfire risk is brush clearance. Brown said that policy writers typically like to see 200 feet of brush clearance around a property.

“Have as much clearance around your house as you can,” Brown said. “It’s the low brush that’s the issue; dry grass, your manzanita, your mesquite, anything thing that’s going to go up (in flames) quick. The more clearance you can get the better.”

In the meantime, county residents who find themselves without homeowners insurance do have a number of options. One of those options includes the California FAIR plan, a private Los Angeles-based association of all insurers licensed to write property insurance in the state.

Voss said that the California FAIR plan is an “insurance of last resort” for homeowners who cannot find coverage elsewhere. Although the coverage offered by the California FAIR plan is not as comprehensive as those offered by private insurance companies, Voss said it does provide basic fire insurance coverage for residential and commercial structures.

Voss said that before homeowners resort to the FAIR plan, they should “shop around” and see what insurers may be willing to write policies in their area.

“Consumers should not just think of the larger insurers they see on TV or radio,” Voss said. “Other insurers that are not as well known; they may be willing to write for them.”

The California Senate Insurance Committee last month held an informational and oversight meeting to discuss concerns statewide of availability of affordable homeowners insurance in high-risk fire areas. In an information packet for the meeting, Calaveras County was listed as one of 11 counties in California with an estimated 50 to 75 percent of dwellings in a high- or very-high fire-risk area.

State Sen. Tom Berryhill, (R-Twain Harte), whose district includes Calaveras County, is a member of the committee. No action was taken during the meeting.

“We have not really received many calls or letters from folks as of yet but it could potentially become a bigger issue as people’s homeowner insurance policies come up for renewal,” Berryhill said in a written statement. “I am absolutely keeping a close eye on this topic.”

Berryhill’s communications director Eileen Ricker said that Berryhill’s district offices have received only one email on the topic.

Berryhill is co-author of legislation to increase public awareness of insurance options, specifically insurance available through the California FAIR plan.

If passed, the bill would require the FAIR Plan Association to create and maintain a website providing information about the FAIR Plan and how to apply for insurance through it. The bill would also require insurers to provide applicants denied coverage or policyholders whose policies are canceled or non-renewed with the association’s website address and toll-free number.

The bill was introduced by Sen. Mike McGuire, and co-authored by Berryhill, Senate Insurance Committee Chairman Richard Roth, and Assemblyman Bill Dodd. SB1302 is set for a hearing during the next Senate Insurance Committee meeting on April 13.