Before the devastating Los Angeles fires this week, California already had a looming insurance crisis on its hands. Fast-forward to present day, as flames continue to burn in the greater Los Angeles area, harrowing reports have emerged of thousands of homeowners being dropped by their insurance companies ahead of the Palisades Fire. In one particularly heartbreaking example, ABC 7 reported on a nonagenarian couple whose fire insurance was canceled before the Eaton Fire. “They’ve lived in this house for 75 years, and they’ve had the same insurance, and these insurance people decided to cancel their fire [insurance],” said Lynn Levin-Guzman, the couple’s daughter, donning an N95 face mask as smoke rises by her family home. “Thank you, California insurance companies, for supporting residents who pay taxes and love California. And they wonder why people leave,” she added, tongue in cheek.
After safely evacuating her parents, refusing to abandon the house she grew up in, Levin-Guzman headed to the Eaton home to try to protect it—armed with only a hose—despite evacuation edicts. “Under the circumstances, send me to jail, that’s fine,” she said.
Unfortunately, even before these latest Los Angeles fires, the sad state of insurance is nothing new. “Insurance companies have been scaling back and withdrawing from California for years, not just in the homeowner insurance market, but auto as well. They cite increased risk leading to payouts not aligning with a commensurate ability to raise rates,” says Los Angeles based Ari S. Friedman, partner with Wisner Baum who has extensive experience in wildfire claims litigation, calling the situation a “convoluted nexus of considerations that has created a tension between the insurance company, the state of California, and the homeowner.
According to Friedman, the insurance issue is not just one that Californians encounter, but it has been seen nationwide as disasters become more frequent and costly. “More communities are at a risk of fire, and in the face of aging homes that may have features that pose an increased risk, such as wood shakes or shingles, these companies have opted to stop coverage,” he says. In California, specifically as of late, Friedman says insurance companies have cited gradual changes in weather patterns making conditions dryer, the inability to raise rates in response to increased risk, the failure of utility companies and governments to adequately prepare for extreme situations, and more frequent fires and disasters leading to payouts.
