‘A ton of unknowns’: Los Angeles residents lost their wildfire insurance months ago. Then the fires came | California wildfires

WWhen James Borow realized last Tuesday that his Palisades house was on fire, he was 300 miles away in Las Vegas, at the Consumer Electronics Show. There was a power outage at his house, but a friend suggested he turn on his Tesla remotely and see if the cameras showed anything.

From the car camera, he watched in panic as his house burned. As he was driving home from Vegas to Los Angeles, he called his parents and told them, “You’ll see it on the news tomorrow, but the house is completely gone.” I just watched it.

Borow’s first concern was finding housing for his family. His second was insurance. Three months ago, he received a letter from his insurer, State Farm, informing him that his fire insurance policy was not being renewed. The letter advised him to purchase fire insurance through California’s Fair Plan, created by lawmakers 50 years ago to help people who had no other insurance options. “In the end, my confidence increased by 400%,” says Borow. “It was expensive, but it wasn’t complicated.”

Borow was one of 1,626 State Farm customers in the Palisades area whose fire insurance was not renewed at the end of 2024, according to the California Insurance Bureau. They accounted for about 70 percent of State Farm’s market share in Pacific Palisades, according to the San Francisco Chronicle.

Some of those let down by insurance, like Borow, found insurance through Fair. For others, high prices or certain fireproofing requirements issued by new insurers were prohibitive.

Francis Bischetti told the Los Angeles Times that Farmers Insurance, another major provider, told him last year that his home insurance for his Pacific Palisades home would increase from $4,500 to $18,000, which was out of scope for its budget. He couldn’t get a Fair plan because he would have to cut down 10 trees around his house, which was another huge cost, he said. His house burned down and he had no insurance.

Finding fire insurance for homes located in high fire risk areas is a challenge that will only increase for Californians, experts predict. Michael Coffey, an insurance defense litigator who works on large global insurance cases, says he expects more insurance companies to leave the state, which would lead to higher prices for everyone.

It will force more Californians to make heartbreaking choices: pay up, live in an uninsured home, or move elsewhere.

More than 450,000 California homeowners purchased insurance through the Fair Plan in 2024, more than double the number in 2020. Even for those who were able to afford the coverage, uncertainty surrounds the plan.

As of Friday, the Fair Plan had only $377 million to pay claims, according to Sen. Alex Padilla’s office, and the policies only cover basic property damage in the $3 million range.

It’s too early to know whether Fair has enough reserves to pay the billions it could soon owe. Last year, Victoria Roach, president of Fair Plan, told the California Legislature that the system was just one major event away from insolvency. “There’s no other way to say it, because we don’t have the money on hand (to pay all the claims) and we’re very exposed.”

“Since the Fair Plan is run by the government, I’m sure they will try to find a solution,” Coffey said. “But unfortunately, that cost will be borne by taxpayers, whether at the state level or at the federal level.”

In the short term, Los Angeles County Insurance Commissioner Ricardo Lara said he has used his moratorium power to prevent insurance companies from canceling or not renewing homeowners coverage for fire victims of Los Angeles forestry in affected zip codes over the next year.

Longer term, the state is seeking solutions as its insurance market is overburdened by the devastation caused by disasters fueled by the climate crisis. New regulations that came into force this month allow insurers to take the climate crisis into account when setting their prices – which many insurance companies say was the reason they pulled out of the market of state insurance. Previously, California did not let insurance companies consider current or future risks when deciding how to price their policies.

Coffey says the government cannot be a blind insurer of people’s homes. “It’s not something the government can take care of,” he said. “It’s too expensive and would overburden the system economically.

“If people thought it was expensive to live in California today, I think they should understand that the price is based on risk,” Coffey says. “And California has a lot of insurance risks between earthquakes and wildfires, so you’ll have to pay a lot more.”

California is not alone: ​​Nationwide, average homeowners insurance premiums increased by more than 30% between 2020 and 2023, according to the Brookings Institution, due to increases in climate-related disasters as well as of increasing house construction costs. In Florida, government-run Citizens Property Insurance Corp., their version of Fair, is one of the 10 largest home insurers in the state.

Borow hopes Fair will pay his claim and he can get additional funds from State Farm.

Coordination between State Farm and Fair has been extremely difficult, he said. “There are just a ton of unknowns. And so every question you ask on the phone, the reps say, honestly, I don’t know. I’m trying to find the answer. So no one knows what’s going on.

Getting businesses to pay their claims could be a challenge in California even before the fires. In 2023, three homeowners insurance companies in the state denied nearly half of their claims, higher than the national average. Los Angeles-based Farmers Insurance tops the list, denying about 50 percent of payment requests, according to an LA Times report.

Borow hopes he can eventually rebuild his house in Palisades: “I hope in four years we will have a house again. I would say this is the best case scenario.