California’s insurance commissioner, Ricardo Lara, has issued a mandatory one-year moratorium on insurance companies refusing to renew policies on homes in wildfire disaster areas in Northern and Southern California.
This is the first time the insurance department has issued such a moratorium under a new law, Senate Bill 824, also known as the Wildfire Safety and Recovery Act, which took effect in January.
Declaring that the “homeowner insurance crisis” extended beyond the wildfire perimeters and impacted residents statewide, the commissioner 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 a statewide emergency due to fires and extreme weather conditions.
According to the commissioner, a statewide moratorium would provide all California homeowners, renters, and businesses peace of mind, and 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 homeownership from becoming the California nightmare, as an increasing number of homeowners struggle to find coverage,” the commissioner said. “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. Although another law prevents non-renewals for those who suffer a total loss, the new law establishes protection for those living adjacent to a declared wildfire emergency who did not suffer a total loss.
Following Governor Gavin Newsom’s emergency declarations in October, the Department of Insurance partnered with CAL-FIRE and the governor’s Office of Emergency Services to identify wildfire perimeters and adjacent zip codes within the mandatory moratorium area. The commissioner’s new action covers seven of the 16 wildfires within state-declared emergency areas, and CAL-FIRE is working to identify perimeters for the remaining nine fires, which the Department of Insurance will announce in a separate bulletin.
In August, the Department of Insurance released data revealing insurance companies were dropping an increasing number of residents in areas with high wildfire risk. The number of non-renewals rose by more than 10 percent last year in seven counties from San Diego to Sierra—a direct response to California’s recent devastating wildfires. The number of consumers covered by the FAIR Plan — California’s insurer of last resort — has surged in areas with high wildfire risk. According to the U.S. Forest Service, more than 3.6 million California households are located in the wildland urban interface where wildfires are most likely to occur.
The action by the commissioner builds on his order last month to require the FAIR Plan, by June 1, 2020, to expand its coverage to offer a full homeowner policy in addition to its current limited fire-only policy. The commissioner also demanded that, by April 1, 2020, the FAIR Plan increase the dwelling fire combined policy limit from $1.5 million to $3 million, in recognition of higher home values. By February 1, 2020, the FAIR Plan will offer a monthly payment plan without fees and will allow people to pay by credit card or electronic funds transfer without fees.