May 19, 2019 Breaking News, Latest News, and Videos

Fire Insurance Crisis Almost Upon Us

Californians already know about the wildfire crisis that’s been afflicting this state for the last few years, highlighted by a rash of huge blazes and the evacuations of at least 250,000 persons. It’s caused by a combination of climate change, forestry practices and the seemingly endless human drive to build more and more houses in increasingly remote and fire-prone areas.

But many may not realize that a fire insurance crisis is also almost upon us.

Sure, state legislators led by incoming state Insurance Commissioner Ricardo Lara worked much of the year to protect victims of the huge 2017 fires that hit the Wine Country, Ventura County and parts of San Diego County.

Homeowners burned out in this year’s firestorms in Shasta, Butte, Ventura, Los Angeles and rural parts of Mendocino, Lake, Orange and Riverside counties, could also benefit from what they’ve done – essentially expanding from one year to two the time when insurance companies cannot cancel fire coverage in burned-out areas or their nearby peripheries. The clock starts running on that time when the governor declares a state of emergency in a fire area.

But…there’s nothing to prevent insurance companies from lowering their risks by canceling policies on homes and other buildings in fire-prone areas that have not yet burned.

There’s little doubt insurance companies want to minimize their risks. They were the leading lobbyists against a legislative bill letting big utility companies off the hook for damages caused by fires their equipment starts. That could have upped liabilities by hundreds of millions of dollars for insurers, who would then raise premiums everywhere, not just in wildfire-prone areas. A fall-back bill that eventually passed could end up causing those very things.

Insurance lobbyists also fought a bill requiring living expense insurance to include all reasonable costs of fire victims seeking to maintain their pre-conflagration living standards.

These were among the biggest battles of the last legislative year, and they are not yet settled, with a special commission now attempting to hash out solutions designed to keep the utilities out of bankruptcy without dunning the average homeowner large new sums.

With utilities already facing liabilities in the multiple billions of dollars, it may be hard to find such a formula, especially in a state increasingly fed up with large corporations fobbing the costs of their mistakes and negligence onto their customers.

Which means that what outgoing Gov. Jerry Brown said last year about wildfires and climate change – “All hell is breaking loose” – applies now to more than the actual fires. Things always get more contentious as monetary stakes rise.

But the threat to fire insurance isn’t completely new. Outgoing state Insurance Commissioner Dave Jones saw it coming a year ago. “The companies must renew policies for a time on homes in fire disaster areas,” he said then. “But they don’t have to renew policies in non-disaster areas when they expire and they don’t have to renew homes in disaster areas beyond the time limits.”

So crisis is here. But it won’t be like what happened after the 1994 Northridge earthquake, when property insurance companies refused to renew most policies and stopped writing new home and business property coverage anywhere in California. That impasse – it amounted to blackmail – ended in 1996 with creation of the California Earthquake Authority and elimination of an old rule forcing companies that write property insurance also to offer quake insurance. The state-run CEA now writes the vast majority of earthquake policies.

That’s because there is a safety net of sorts for homeowners whose coverage is not renewed. It’s called the Fair Plan, roughly equivalent to the CEA in that it must insure anyone who applies. But Fair Plan rates are much higher than other fire policies, although by law prices cannot be excessive, whatever that means.

Before last year’s blazes, the number of Fair Plan policies was rising by about 1,000 per year. The figure was up in 2017 and likely will climb substantially over the next two years. So the fire insurance crisis will be less about scarce insurance than it is about money.

That won’t make it any less painful for those who are forced to foot much higher bills than ever before.

Email Thomas Elias at [email protected] His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, go to www.californiafocus.net

Related Posts

The Myth of “Public” Art in Santa Monica

February 8, 2019

February 8, 2019

Over the past few years, the Stanton MacDonald Wright murals at the entrance to Santa Monica City Hall have stirred...

Beausoleil: First Parole Test for Newsom

February 10, 2019

February 10, 2019

Not many Californians under 60 can recall just who is the 71-year-old Bobby Beausoleil and what evils he did back...

AI in the Year 2020… Almost

February 11, 2019

February 11, 2019

By Nektar Baziotis In 1966 Gene Rodenberry’s “Star Trek” made its television debut on NBC. Audiences young and old were captivated...

Is Santa Monica’s Heart for Sale?

February 15, 2019

February 15, 2019

Note from SMa.r.t.: This article, in a longer form, was originally published four years ago but is still as pertinent...

Column: Adapting to Westside Vacancies

February 18, 2019

February 18, 2019

By Avi Sinai We all see the vacant storefronts around the Westside and it begs the question – why are...

SMa.r.t. Column: Gridlocked Best Intentions

February 22, 2019

February 22, 2019

On any given evening (and especially weekends) pay a visit to north-bound 2nd Street between Broadway Avenue and Santa Monica...

No Excuses: Stop the Crime Wave

March 1, 2019

March 1, 2019

My mother turned 91 last Saturday. Happy Birthday, Mom! She has walked the streets of Santa Monica her whole life...

Column: Can we Solve Westside Traffic with more Housing Development?

March 5, 2019

March 5, 2019

About the author: Avi Sinai is the principal of HM Capital, a Los Angeles company specializes in hard money real...

Open Space… Is There Any Left?

March 9, 2019

March 9, 2019

Yes there is. Small as it is, there is about 2.5 acres in the heart of downtown waiting to be...

Letter to Editor: Former Mayor on Voting Rights Case

March 13, 2019

March 13, 2019

By Paul Rosenstein Former Mayor of Santa Monica I hope the judge’s order for district elections is stayed during the...

Ban of Fur Trapping Passes Key Hurdle in State Legislature

March 17, 2019

March 17, 2019

By Staff Writer  Assembly Bill 273, the Wildlife Protection Act of 2019, which would end the commercial fur trapping industry...

Brock on Your Block: Ernest Marquez

March 15, 2019

March 15, 2019

By Phil Brock  In the latest Brock on Your Block, Phil Brock sits down with Ernest Marquez, a virtual treasure-trove...

Thanks, Village of Field Warriors

March 15, 2019

March 15, 2019

That huge gust of wind you felt one rainy afternoon last week wasn’t a gust of wind at all. It...

I Eat, Therefore I Risk:

June 24, 2010

June 24, 2010

Let’s start with the water bottle. Because that’s just such a strange modern mentality to begin with… the notion that...

Hometown Hero: Ted Winterer:

June 24, 2010

June 24, 2010

2010 will be the first time Ted, his wife, the designer Beck Taylor, their children, Eleanor and Steele, and their...