California bans insurers from dropping policies in wildfire areas
California’s insurance commissioner Ricardo Lara has issued a mandatory one-year moratorium on insurance companies non-renewing policyholders. The move will help at least 800,000 homes in wildfire disaster areas in Northern and Southern California.
The commissioner’s action is the result of Senate Bill 824—authored last year by Lara while serving as state senator—in order to give temporary relief from non-renewals to residents living near a declared wildfire disaster. This is the first time the department has invoked the new law, which took effect in January.
Because the homeowner insurance crisis extends beyond the wildfire perimeters and impacts residents statewide, Commissioner Lara went a step further and called on insurance companies to voluntarily cease all non-renewals related to wildfire risk statewide until December 5, 2020, in the wake of Governor Gavin Newsom's declaration of statewide emergency due to fires and extreme weather conditions.
A state-wide moratorium would allow time for stakeholders to come together to work on lasting solutions, help reduce wildfire risk, and stabilize the insurance market.
“This wildfire insurance crisis has been years in the making, but it is an emergency we must deal with now if we are going to keep the California dream of home ownership from becoming the California nightmare, as an increasing number of homeowners struggle to find coverage,” said Commissioner Lara. “I am calling on insurance companies to push the pause button on issuing non-renewals for one year to give breathing room to communities and homeowners while they adapt and mitigate risks, give the legislature time to work on additional lasting solutions, and allow California's insurance market to stabilize.”
The mandatory one-year moratorium covers more than 800,000 residential policies in ZIP Codes adjacent to recent wildfire disasters under the newly enacted Senate Bill 824 (Lara, Chapter 616, Statutes of 2018), also known as the Wildfire Safety and Recovery Act. While existing law prevents non-renewals for those who suffer a total loss, the new law established protection for those living adjacent to a declared wildfire emergency who did not suffer a total loss—recognizing for the first time in law the disruption that non-renewals cause in communities following wildfire disasters.
Commissioner Lara's action comes amid growing evidence that homeowner insurance has become more difficult for Californians to obtain from traditional markets, forcing them into more expensive, less comprehensive options such as the FAIR Plan that do not offer the same level of coverage or protections.
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