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As California owners lose insurance coverage on account of wildfire danger, the state is stepping in

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The California Insurance Department on Thursday implemented a new state law that prohibits state-regulated insurance companies from not renewing policies for homeowners living in ZIP codes in or adjacent to wildfires for one year from the date the area was declared a disaster.

Insurance Commissioner Ricardo Lara also called on all regulated insurers to voluntarily halt non-renewals based on wildfire risk for all business and residential customers statewide for one year, until Dec. 4, 2020.

The moves come at a time when homeowners in areas at high risk of wildfires are finding it harder to get and keep insurance. Lara made the announcement at the home of Sean Coffey of Montclair, whose home in the Oakland hills has been non-renewed three times, by three different insurers, since 2015.

Older state laws prevent insurers from not renewing customers who suffered a total loss caused by a declared disaster for a certain period of time. For losses suffered before 2019, they must offer to renew customers at least once. For losses in 2019 and later, they must offer to renew at least twice or for 24 months, whichever is greater.

The new law, which Lara authored when he was a state senator, took effect Jan. 1 for declared wildfire disasters starting on or after that date, but there were none until October. SB824 prevents insurers from non-renewing any residential policy in a ZIP code within or adjacent to a wildfire perimeter, for one year from the date a disaster was declared. It applies only to non-renewals on the basis of wildfire risk.

Cal Fire determines each fire’s perimeter and the insurance commissioner identifies which ZIP codes are covered.

On Thursday, Lara issued a list of ZIP codes for seven of the 16 fires included in emergency declarations issued by Gov. Gavin Newsom this fall. The list includes the Kincade Fire in Sonoma County and major fires in Southern California. It will identify ZIP codes in and around the other wildfires soon.

The laws preventing non-renewals, as well as Lara’s call for a voluntary moratorium, only apply to insurance companies regulated by the state. They do not apply to surplus carriers, such as Lloyds of London, which are not state-regulated.

In August, the department released data showing that non-renewals are growing in response to wildfire risk. They rose by more than 10% last year in seven counties from San Diego to Sierra.

Homeowners turned down by mainstream insurers are turning in growing numbers to surplus carriers and to the Fair Plan, California’s insurer of last resort which offers limited coverage.

Coffey said “it was a scramble” getting insurance when he and his wife bought their Oakland hills home in 2015. “I talked to six or seven companies, and finally found one the day before we closed on the house,” he said.

A year later, they got a non-renewal notice and had to find another insurer. The next year, that company declined to renew. Their third company insured them for two years, then dropped them. This year, they got a Fair Plan policy, which offered limited coverage for $1,480, and a separate policy from another company for liability and other coverage the Fair Plan lacks, for $580. They just got a notice that their Fair Plan policy is going up by about $670 next year.

Coffey and his wife Elizabeth both work for nonprofits and have two young children. Insurance is a big expense and it’s hard to budget for when the cost is unpredictable. “Every year I get nervous that we are going to get a letter” of non-renewal, he said. “I just didn’t know it would be such a problem for homeowners.”

Last month, Lara ordered the Fair Plan to double the coverage limit on its bare-bones homeowner’s policy to $3 million by April 1 and begin offering a comprehensive policy alongside it. The Fair Plan is an association backed by state-regulated insurance companies in proportion to their market shares. A trade group opposed that command, saying it could result in increased operating costs that will be passed along in the form of higher rates for all policyholders.

Industry spokesman Rex Frazier, president of the Personal Insurance Federation, issued a statement in response to Thursday’s announcement: “As climate change accelerates, we are facing more and growing wildfires in California, and we must adapt to that reality and factor climate change into coverage and rates to ensure availability of insurance for all homeowners. Year-over-year losses that the industry has seen are not sustainable for companies or good for homeowners. We look forward to working with the insurance commissioner to anticipate and prepare for these impacts on the insurance market to ensure that homeowners have access to coverage.”

Homeowners can find the list of ZIP codes at http://bit.ly/cafirezipcodes.

Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender



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