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Fireplace Insurance coverage Cancellation Moratorium

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On Wednesday, Dec. 18, at 6 p.m. California State Insurance Commissioner Ricardo Lara held a round table meeting organized by County Supervisor Janice Rutherford and Lewis Murray to discuss the problems mountain communities across the state have been facing with policy non-renewals due to climate change. The intense meeting laid out a ‘game plan’ for how the State Insurance Commissioner’s office was going to tackle the issue of Fire Insurance Non-Renewals in communities located in heavily wooded and fire-prone areas like the San Bernardino Mountains.

“We pretty much traveled the entire state, talking to communities and talking to people about this ongoing issue,” Commissioner Lara began. “So in San Bernardino County, these are some of the trends we’ve been seeing that more or less correlate with the rest of [the state].” 

“We’ve seen a 6%, increase in Cal Fire responsibility areas and we know that more are [to be] expected with the 2019 fires. We’ve also seen a growth of 39% and an increase of new and renewed policies by the FAIR Plan. And we know that the FAIR Plan is the insurer of last resort in San Bernardino County. And I’ll tell you, our department has seen an increase of more than, 100 rate increases filed by insurance companies statewide 2017/2018, that, again, don’t again account for the future filing of insurance companies for wanting a rate adjustment for the 2019 year.” Lara said.

Lara explained that what is driving the increase in decisions of insurers to issue nonrenewals has to do with the frequency and ferocity of recent fires. 

“Ten of the twenty most destructive California wildfires in California history have occurred in the last four years.” Lara continued, “As risk increases, we know that the cost of insurance increases and the availability of coverage decreases, those go hand in hand. And again, I know many of you already know this information. Insurers consider the very recent past underwrite, and determine the rates for the following year, which we know today. The insurance of the insurance industry has appointed a loss of $25 billion in losses in 2017/2018 alone. So that is the perfect storm of what’s happening across the state and how it’s impacting, specifically, San Bernardino County.”

“Residential underwriting has also changed – and many of you have experienced this already,” Lara added. “We know that insurance traditionally would look at your individual parcel, your individual property, they will come in and assess and see if you have done the appropriate home hardening, if you had a defensible space. Now, it has completely changed. Now you have to get some citizen to look at some satellite imagery that really, in my opinion, doesn’t really tell the story of what’s happening at the granular level.”

At this point in his presentation, Lara pointed to a PowerPoint slide that showed a ‘Google Maps’ like image of a mountain community with a large red circle drawn around a small cluster of houses, compared to a diagram showing a house surrounded by defensible zones that insurers used to measure how protected a home was from a fire. He called the Google Maps approach the ‘New School’ approach, and the individual house/property approach the “Old School” approach. 

“So, now they just look before you even get to that point [of assessing your property], you now go through a first pass through this ‘evaluation filter’ that only looks at slope, field [vegetation], in type of field [drought prone, etc.], and access [roads]. So, in my opinion,  it doesn’t really give you the full picture of what communities have done and what homeowners have done to harden their home, and to protect our properties.”

“Many of our neighbors have had the same company for 30 plus years and have never had a claim, and they still get dropped.” Lara said, “We’ve also heard that there’s no consideration for free fire mitigation, or home or fire hardening. Many of our neighbors also say, you know, the insurance company said “I need to do X, Y and Z. I shelled out the $10,000 to do this [home hardening], and I still got dropped.” Right?” 

“We want some statewide standards that are very clear on what is going to keep the community safe, and we need the insurance companies and our first responders to be engaged in that process so that we all know as a state, what are some basic guidelines of community mitigation standards. We feel that, in particular to the community mitigation standards, it helps us be proactive. So as a community what we need to do we look at our individual communities. Look at ingress/egress. At our fire stations. At the amount of water storage we have. Etc. Etc. That we start looking at what that’s going to look like, as opposed to just parcel by parcel by parcel because we know that in many cases you might have done everything spent the money to mitigate your property your neighbor might have not.” Lara said.

“Or maybe it’s a second property for somebody who doesn’t live it doesn’t live there,” he added. “So we want some community-wide mitigation standards, we feel this is the way we keep being proactive lessen the risk. We try to bring the insurance market back. And we also know that the FAIR Plan is insufficient coverage. And we know that the new reality, unfortunately, is that the FAIR Plan is the only option for so many of our neighbors. I was up in Sierra County where we asked people “Have you shopped around? Have you found insurance coverage?” The gentleman [I asked this question of] laughed in my face and said, ‘Hey, nobody would call us back. The FAIR Plan is the only option for us. It is the only permanent option that we have. And that is the reality whether we like it or not.’” 

“This is the reality and so we feel that we need to do something about the Fair Plan,” Lara continued, “It needs to become a comprehensive HO3 policy so that then consumers don’t have to buy the ‘wraparound’ insurance, which only adds to the cost. So my argument is as an insurance company you can have it both ways. You can send somebody the fair plan, knowing that is limited in scope, and then offer them the additional coverage for what you are willing to take the risk. It’s not, it’s not fair. So we want the FAIR Plan to be a full, comprehensive, coverage and we have a plan for that.” 

Pertinent to Lara’s Senate Bill 824, and Governor Gavin Newsom’s declaration of a statewide fire emergency in October, all the surrounding ZIP codes of active wildfires at the time became subject to a state-issued moratorium of non-renewals. For the San Bernardino Mountains, these ZIP codes include the following: 92404 (the Del Rosa/Wildwood neighborhoods in, San Bernardino above 40th street), 92346 (Highland and the lower portion of City Creek Road, extending east to Greenspot), 92407 (the neighborhoods along the 15 Freeway heading up the Cajon pass beginning in Muscoy and ending in Cajon Junction), 92405 (Northern San Bernardino along the 215 Freeway), 92325 (Crestline, Valley of Enchantment, Cedarpines Park, Valley View Park, Skyland), and 92322 (Cedarpines Park), 92345 (Silverwood Lake up to Hesperia), 92314 (Big Bear City, Baldwin Lake, Sugarloaf, and the homes surrounding the Big Bear Resort Ski Area), 92315 (Big Bear Lake), 92352 (Northern and Western Lake Arrowhead – excluding Lake Arrowhead Village, Blue Jay, Arrowhead Villas, Crest Park, the North Shore, Lake Arrowhead Villas, Deer Lodge Park), 92321 (Southern and Western Lake Arrowhead – including Lake Arrowhead Village, Cedar Glen, Hook Creek Tract, Skyforest and the homes around Skypark at Santa’s Village), 92382 (upper City Creek Road, Highway 18 between Lake Arrowhead and Running Springs, Heaps Peak, Portions of Running Springs), 92386 (Big Bear City), 92391 (Twin Peaks), 92341 (Green Valley Lake, and the homes near Snow Valley Ski Resort), 92333 (Fawnskin), 92317 (Agua Fria), 92378 (Agua Fria, Rimforest, Daly Canyon and the homes along Highway from Red Rock Scenic Overlook to Rim of the World High School), and 92385 (Skyforest). This means that if you live in one of these ZIP Codes and your insurer did not non-renew on your policy prior to the Hillside Fire and Old Water Fire in October, then they cannot cancel your policy until at least October 2020. If you have been canceled on since October 2019 and you live in one of these ZIP codes, you are still entitled to coverage from your insurer. 

“We got the ZIP Codes for the Inland Empire communities,” Lara said, “Big Bear, Arrowhead Running Springs, Riverside, Rialto, Highland, Colton, Perris. Over 50 ZIP codes in San Bernardino County are now protected as of today. So that is a big win for us.” 

After a round of applause, Commissioner Lara laid out his 2020 Action Plan. 

“We’re going after legislation that says that if you’ve done everything to harden your home [and create] a defensible space then an insurance company has to write you a policy.” Lara said, “They can no longer just abandon you. We’re going to force them to state law to keep you covered. We’re not going to force insurance companies to cover everyone, [however] we want to show companies that cover those homes that [homeowners] have done absolutely everything that we’ve asked them to do to keep their own safe. We think that’s a fair trade. We think that’s a fair thing for them to do. By their own admission insurance companies have said that mitigating your home [and] creating a defensible space lessens your risk.”

“I don’t want is for you want to invest thousands of dollars, and then still get dropped,” Lara continued, “I want you to invest the money. And if you need that optimistic to receive that house and invest in your property, and then mandate insurance companies, cover your home. That is the legislation we’re going to seek in the coming year.”

In addressing the shortcomings of the FAIR Plan, Lara said: “We want the FAIR Plan to be a comprehensive coverage. We want to increase its coverage limits from $1.5 million to $3 million by April 2020, and we want to allow the FAIR Plan policyholders to make sure they make monthly payments by credit card with no additional fees. We think it’s the right thing to do. I mean just modernizing the FAIR Plan. Those [coverage] limits haven’t risen since the ’70s. So, we want the FAIR Plan to provide a full HO3 policy, [and] we will look at making sure that they have the right increase in fees to be able to offer this service.”

New measures are also going to go into effect to prevent policy nonrenewals from catching consumers off guard. Lara’s new measures prevent nonrenewal notices from being sent out 45 days from the date of the policy’s cancellation and extend the period to a minimum of 75 days.

“Right now you have 45 advance notice when you’re going to be non renewed by the insurance company,” Lara said, “We think that’s insufficient. So the legislature review does increase it to 75 days. We want to get to a point where it gets to 180 days. We want to give you the appropriate time to make a decision about what’s going to happen. People have told us 45 days was nowhere near enough time to make a decision”

Lara also said that he is working to put measures in place to provide more transparency for consumers on behalf of insurance companies when it comes to calculating your property’s ‘risk’ score.

“Another thing we want to get done in the coming year, during the moratorium, is [provide transparency on] these Fire Risk Scores,” Lara said. 

“These Fire Risk Scores need greater transparency. [When] you get assigned a risk score, you have no idea why or how [and] no opportunity for you to appeal that score. No opportunity to mitigate to lessen that score. And no ability for you to look at what the methodology was that [Insurers] used to [calculate] your score.” 

A common problem Lara says he’s encountered stems from this lack of transparency.

“Why is one neighbor, six and the other neighbor, three, right?” Lara added, “So, we as a department are asking for the authority to be able to open this ‘black box’ and determine how these risk scores are being assessed. What is the creative process so that by which you can appeal your score, and make it more transparent so that local community leaders actually know what is the methodology that’s being used to assign these risk scores – which, currently, we have no idea how they’re doing this.” 

During the public comment section of the meeting, Michelle Wimmer of Farmers Insurance in Rimforest spoke about challenges she’s faced with the lack of transparency in how Fire Risk Scores are calculated. 

“I am a 29-year mountain resident and I’ve also been an insurance agent for the past nine years and I now run my own independent brokerage.” Wimmer said, “in all this crazy mayhem we have done 1,800 rewrites. People who have now lost policies have been forced out of the markets and people have left the mountain and are selling. Our market is getting very hairy. In 2015 my [Fire Risk] Score doubled. It went from six to twelve. And my insurance went from $1,300 a year to over $6,000 a year. Now as an agent I have a discount, but I’ve been dragging this ball and chain now going on five years.” 

“People can’t afford [these rates] and there’s nowhere to rebut them and there is nowhere to talk to anybody and find out how/why/where this happened,” Wimmer added. “I just came home one day and now I have a [score of] 12? There are cliffhanger [homes] above me on the downslope with four miles of brush and they’re sixes or eights.” 

Wimmer also expressed concern about where the FAIR Plan might become a state-mandated or ‘socialized’ kind of insurance as this might lead to the mountain communities being back to the same box and down the road.

Commissioner Lara then addressed Wimmer’s concerns head-on. 

“We feel that for so many folks, [the FAIR Plan] already is the only permanent solution,” Lara said, “My job is to make sure we have a solid market that insurance companies have the resources they need not only to do business in California, but they have the resources to pay out the claims. We’re going to do the same thing with the FAIR Plan. But, the reality that’s happening now is that it is the only permanent solution for so many communities, and it’s not a policy that [provides] full coverage and it just exacerbates the cost for folks.”

Even fire prevention experts who know firsthand about creating a defensible space around a property are being canceled on. Big Bear Fire Department Chief Jeff Willis spoke about how his policy was dropped by his insurer due to the ‘new school’ way that insurers use a Google Maps-like tool to define risk.

“[Comissioner Lara], you made an example of ‘old school’ versus ‘new school’. Well, we know that ‘old school’ works,” Willis said. “It absolutely does work. And as a Fire Official, I know that the fireline score is really flawed in many, many, areas. I just want to tell you about my property in the Big Bear community. It was not a weed or a tree on the property – not a single one – it’s pretty much concrete and asphalt. The nearest house to me is 25 feet away and the reasons that were stated for my cancellation were: vegetation (there are none), road access (not true – I’m on a 35-foot road) limited fire flow (I’m one of the highest fire-flow areas in our neighborhood), and in my particular case I’m just not gonna argue with an insurer is they don’t want to begin with and so we’ve moved on. And I’ve seen many, many, examples in our community with one property right next door another they’re rated differently.” Willis said.

“While I think the fireline score – the ‘new school’ – has value, you can only rely on ‘new school,’” Willis added. 

Brenda Meyer, the broker/owner of Cozy Cabins Realty in Crestline, attended the meeting to speak on behalf of other agents that are affected by nonrenewals. 

“We have been dealing with [nonrenewals] in the mountains for 16 years. After the 2003 [Old] Fire, the major carriers started to exit our area, and then 2007 they basically red-lined us,” Meyer said. “So we were forced to advise our clients choose between the FAIR Plan or go with an out-of-state insurer, which many of us know out-of-state insurers don’t have the regulations and protections and work within California.”

“Many of these homeowners didn’t realize when it came to that the FAIR plan was an insufficient policy. And they didn’t realize that until they actually filed their claim and found out that their 10s-of-thousands of dollars in losses are not going to be covered. They were, needless to say, very upset and coming back to many of us. The alternative is another plan at a much higher rate so it’s understandable that they chose what they chose. I’m a 30-year policyholder that got canceled on last month. No claims. And like so many they were just not renewing our area at all. We do see all the indications of a perfect storm brewing. Escrows are falling apart because lending officers under-estimate the cost of insurance and buyers find out they can’t afford the home of their dreams, because monthly insurance premiums throw them out of their approved monthly payment. Current homeowners are fixed income sources like insurance and looking outside of California for more affordable options. Affordability for first-time homebuyers entering the housing market continues to be a challenge because of the limited availability and the added skyrocketing cost of insurance. [First time home owners] have to wait longer to become a property owner. But the ones, the property owners with families, I believe are greater at risk as the cost of their insurance expenses continues to rise faster than wages.”

“We have the potential of a decline in property values because of rising insurance costs,” Meyer said. “Or worse, foreclosures.”

During the course of the event, Crest Forest MAC Chair Rick Dinon provided Commissioner Lara with a whitepaper voicing concerns shared by mountain residents. Amongst the questions posed by the paper were the following: “How can the Commissioner help communicate the significant wildfire mitigation steps instituted in the mountain and adjacent communities to insurers and reinsurers?” and “What can municipalities and counties do to assist the Commissioner in restoring an orderly and competitive insurance marketplace? How do we measure success?” Commissioner Lara stated that he would consider the whitepaper his ‘Christmas reading’ and thanked Dinon for providing him with the material before vowing to provide Dinon and the mountain community at large with answers to the questions posed in a speedy manner.

Commissioner Lara concluded the evening’s roundtable by reiterating that he is working hard in Sacramento to help homeowners get approved for full coverage, hold on to their full coverage, and be able to afford their coverage. “More than half of California’s counties are categorized as a high-risk or extremely-high fire risk,” Lara said. “There are around 3.6 million homes and apartments addressed in these [high fire risk] communities and so we’re going to continue to work with the legislature, work with the FAIR Plan, and work with local governments to figure out how we curtail these issues that are unraveling so many of our local economies and communities.”

Commissioner Lara’s action to freeze non-renewals for one year affects over one-million homes and rentals, including 3.6 million homes in the wildland-urban interface across 133 ZIP Codes. 

After the meeting, Commissioner Lara fielded a few minutes of ad-hoc questions from the audience.

If you would like to find out if your ZIP code has been affected by the non-renewal moratorium, or if you have further questions please call the CA Department of Insurance Hotline at 1-800-927-4357 or go to insurance.ca.gov.

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