Tag Archives: homeowners policies

California Wildfires

Warming temperatures and a historic drought made Northern California wildfires burn faster and spread.  This furthermore made the fires harder to fight. The bigger culprit was something under human control – forest mismanagement.

There are five times as many trees per acre in this area today as there were 150 years ago.  The underbrush is twice as thick. This is according to a wild land resource scientist at the University of California at Berkley. If smaller wildfires had been allowed to burn 20 years ago, the forest would not have grown so dense.   Today’s flames would not have had the fuel to reach the canopy. These flames consume the treetops.  They send embers flying, spreading the blaze.

The Valley Fire demonstrates what can happen when public and private landowners fail to manage their property. When people neglect to thin trees wildfires will continue.   Thinning reduces combustible underbrush.

The U. S. Forest Service, which is in charge of most fire management also has a financial incentive to put out all wildfires.  The cost of clearing the underbrush and managing small fires comes from the individual forests’ budgets.  National “fire suppression” is funded by Congress.

In 2014, the federal government spent $3 billion putting out fires – five times as much as 20 years ago.

There are many reasons why people choose to live in California’s Modjeska Canyon.

Nestled against the mountains and adjacent to the Cleveland National Forest, the area has abundant wildlife. It has access to nature, yet is just a 20 minute drive from larger Orange County communities.

The things that make Modjeska appealing have also made homes there and in other wildfire-prone parts of California increasingly difficult to insure.

In the last decade, major wildfires in California and losses in the billions of dollars have led some big insurance companies to stop writing homeowners policies for many of the nearly two million household that are considered at high risk of fire. Allstate Corp., for instance, in 2007 stopped writing new homeowners policies in the Golden State altogether. Others, like Farmers Insurance and State Farm, have become more discerning about the areas the will insure homes.

Californians who can’t find insurance in the traditional market can purchase limited fire coverage from a state-established consortium of insurance companies. However, homeowners who have been denied coverage by standard insurers are not flocking to the state plan.  It is both more costly and far less comprehensive than traditional homeowners’ policies. Rather, they are increasingly signing up for speciality policies. These are provided by companies best known for insuring unusual risks such as major construction projects.  Such policies are still expensive but offer more coverage than the state plan.

Bonnie Smith, a landscape designer who has lived in Modjeska Canyon since 1981, said the availability of traditional homeowners insurance plans tightened after a 2007 fire destroyed several homes in the canyon.

Allstate cancelled Smith’s $1400-a-year homeowners policy in 2012. Smith considers herself lucky that she was able to find a $2100 policy with Lexington Insurance.

Thousands of Californians in hilly, forested areas have also signed up for such policies in recent years with companies like Lexington, Lloyds of London, Nationwide Mutual Insurance Co., Scottsdale Insurance Company and Foremost. So-called surplus line insurers wrote 23, 120 homeowners policies in California in 2014. This represents a 91 percent increase from the 12, 097.  These were written just two years earlier, according to the Surplus Line Association of California.

Surplus Line insurance is meant for higher risks.  Insurance brokers must show that they cannot get coverage for their clients in the standard market before they can get a specialty policy.

The companies that offer those policies must be approved by the California Department of Insurance. However their rates are not regulated like those of traditional insurers.

Part of the attraction of speciality policies is they offer more coverage than the state-sponsored program, known as the California FAIR plan. The FAIR plan offers a basic plan that covers fire.  It will only insure up to $1.5 million for a structure and its contents. That means people have to look elsewhere for other coverage that would normally be included in a standard homeowner’s policy, such as liability for accidents or injury.

The number of policies under the FAIR plan has been flat for the last two years. Nearly 80 percent of the FAIR plan’s 126, 000 policies are in urban areas with no wildfire exposure.