When the Smoke Clears

Last year California endured the deadliest fire season ever, with 1.9 million
acres consumed by 8,527 fires. Now insurance companies are witnessing
  an unprecedented number of claims and astronomical payouts. Indeed, last December, one small Northern California company, Merced Property & Causality Co., went bankrupt in the face of some $64 million in claims from the Camp Fire, the state’s single deadliest fire, which devastated the small town of Paradise. As a result, the state’s insurance industry is changing, and California homeowners — even those unaffected by the fires -– should pay attention to what could be coming down the road.

To date, more than $11.4 billion in insured losses have been reported from last November’s Camp and  Woolsey fires (the latter torched 97,000 acres in Los Angeles and Ventura counties), according to the California Department of Insurance. The number represents 13,000 insured homes and businesses whose owners lodged more than 46,000 claims, as reported by insurers.

According to U.S. Climate Prediction Center forecasters, almost half of California has an elevated risk for fires, and there are 15.5 million people living in critical areas — including parts of Los Angeles. “Change is on the horizon,” says Mark Fitzpatrick, a research analyst with Value Penguin, an analytic research company that tracks the insurance industry. “With the record damage last year, we are already seeing major insurers talking about applying to the Department of Insurance to raise rates. They need their customers to pay higher rates so they, in turn, can pay out the claims.” How much the increase would be depends on many factors, but experts say homeowners can expect to see policy changes in 18 months to three years from now.

Also, insurance companies will likely not renew policyholders considered too high a risk and longtime loyal customers may find themselves unceremoniously dropped. As ruthless as that sounds, insurers “have the right to do that,” says Fitzpatrick. “They can cancel you in 30 days if they [reinspect a property and] see something they don’t like, or even if they don’t want to be in that area anymore,” says Paul Diaz, an independent insurance agent based in Eagle Rock. “That goes for all areas that have homes up against the hills and mountains — La Caňada, La Crescenta, Altadena, Monrovia, Glendora, Sierra Madre. Homeowners in those areas could have their policies dropped and they may have a tough time finding another one.”

The definition of a high-fire-risk area is shifting, and homeowners who previously were in the low-risk category may get a rude awakening, thanks to sophisticated modeling programs — and maybe their neighbors. Using geo-mapping data and satellite imagery, these high-tech wildfire models that predict losses and assess risks consider the home’s natural features, the density of surrounding vegetation, access roads and historical wind patterns. But this evaluator model “also looks beyond the individual home to a designated perimeter around the home that’s maybe 250 yards, a quarter of a mile or greater,” says Joel Laucher, a special consultant at the California Department of Insurance. “People are used to insurers just looking at their own home, but that’s changing,” says Laucher,  adding that even if homeowners do everything they can to reduce risks, they still may get higher premiums or a cancellation because of their neighbors’ houses and/or the surrounding community. The 2018 fires taught insurers that, according to Laucher, “mitigating fire risk is a community effort.”

In the past, insurance carriers lumped homeowners together in zip codes and city boundaries. Now, insurers realize that risk can change dramatically within those distinct areas; risks are being pinpointed today on a near-granular level. Think about your zip code, says Laucher. “Some areas are more of a flatland, others are hilly. Are fire trucks going to have it easy to get to the house? What happens if that big tree falls over and blocks access? These are questions being asked.”

With all these changes in the insurance industry, what can — and should — homeowners do? Just as temblors prompt homeowners to reassess their earthquake preparedness, wildfires should nudge people “to inspect their insurance policies and update if necessary,” says Mel Cohen, an independent insurance agent in Pasadena in business since the 1970s. “You as a homeowner need to know what the rebuilding costs will be to adequately replace your home. So many people think, ‘Oh, I’m covered,’ but maybe that policy is 15 years old and what they have is not enough to cover rebuilding costs in this current climate.”

Estimated replacement costs have been moving upward, but only recently have they skyrocketed. “In 1977, we used $32 per square foot as the baseline number to rebuild a like-kind quality structure,” says Cohen. “But as of the Station Fire in 2016, that number went up to $200 per square foot. And now with these last fires, we think that number should be about $300 per square foot to cover construction costs.” And Cohen’s estimations may be on the low side; Laucher has heard of locations with estimates of $700 or $800 per square foot. Homeowners who want a second opinion can hire a professional appraiser — just make sure your insurer will accept that estimate. Check to see that your policy adequately covers personal property inside the house; expensive jewelry, artwork, antiques may need additional coverage. Finally, make sure you have coverage for living expenses if your home needs to be rebuilt.

If Your Policy Gets Dropped

Homeowners who receive a cancellation notice will have 45 days to find replacement coverage. But don’t worry yet; California is known as a competitive market when it comes to insurance. “Just because one insurer rejects you, doesn’t mean they all will,” says Fitzpatrick. Check out the listing of statewide insurance carriers on the California Department of Insurance website (insurance.ca.gov), which also has numerous interactive tools to help you navigate the process. Fitzpatrick also suggests reaching out to independent agents who represent a variety of carriers.

Shopping around could be advisable for everyone, not just those who have been dropped. “There can be benefits to being a loyal customer, but sometimes a new policy may be cheaper,” says Fitzpatrick. “Be sure you’re taking advantage of all the available discounts such as smart devices, damage mitigation, etc. Check and see if you quality for a premium discount, too.”

If all fails, the California Fair Plan offers basic private coverage to homeowners; supplemental policies to provide liability protection can also be purchased to wrap around bare-bones coverage. Remember, you have an ally in the California Department of Insurance, which can provide assistance and resources.

Similar turbulence around insurance rates and coverage is being played out in other parts of the country facing their own natural disasters. “So much of insurer analysis, the risks vs. the payouts, is dependent on local vulnerabilities,” says Fitzpatrick. “You see the same thing happening in hurricane-vulnerable areas of the East Coast, for example. Natural disasters are a reality we are all facing these days.”

Turtle Whacks

The 5:30 a.m. knock on the door on Nov. 9, 2018, wakened Malibu residents Susan Tellem and husband Marshall Thompson abruptly. “Get out, pack up and get out,” their neighbor told them. “The fire is almost here.”

The couple raced out of their 1978 home and scoured their 1.5-acre property to pack up as many sulcatas, box turtles and Russian tortoises as they could. In addition to day jobs, the couple operates the American Tortoise Rescue, a nonprofit that rescues and adopts out turtles and tortoises worldwide (tortoise.com). Started in 1990, the nonprofit has helped find suitable homes for more than 4,000 shelled critters and care for the unadoptable ones.

As fate would have it, the couple had not unpacked their personal go-bags from a previous evacuation only a few weeks prior. Wrangling the animals proved difficult; Tellem and Thompson gathered up about half of their charges, about 50 turtles and tortoises from the sanctuary and hospital treatment building. They filled the turtle pond, placed all the captured animals (including three cats) into their two cars and sped off.

After driving to Zuma Beach and sleeping with their menagerie in their cars that night, the couple learned their house and sanctuary — along with 15 other homes on their street — did not make it. “We were prepared for the loss when we went back,” she says. “But it was still very hard to see everything gone.” Amazingly, though, almost all the critters left behind — turtles, tortoises and two roosters — survived.

On paper, Tellem and Thompson were fire-ready; brush was amply cut back from their home and other structures. They used fire-resistant cement-board siding and fireproof paint on their house, deck and sanctuary housing. “The fire department loved us because we were on top of it all,” says Tellem. None of that mattered, however, against 3,000-degree heat that melted cages and plastic tubs.

The couple is in the process of rebuilding; the sanctuary is back in working order with turtles and tortoises wandering once again in their familiar habitat. A recent fundraiser is helping to support the onsite hospital which was completely destroyed. The pond has been covered with chain link to keep away raccoons; the previous electric fence burnt and there is currently no electricity.

The rescue operation has good insurance through AARP, and Tellem says she’s learned so much already about the insurance process through this whole ordeal. Her advice to homeowners everywhere: Look at your policy every year and update it. Get the lowest deductible limits that you can afford. If possible, ask someone to look at your property and provide a second opinion if you have any doubts about what level of coverage you should have. Make sure you have a detailed inventory of your home’s assets in writing or on video. “Document every phone call and email contact you have with your insurer,” she says. “Record date, the time, who you spoke to and what you talked about. It’s critical to keep good records.”

The couple is also considering installing other mitigation equipment, including an outdoor sprinkler system with heat sensors that release flame retardants in the event of a wildfire.

Today, Tellem and Thompson are renting a house about 10 minutes from their property. When Tellem goes to feed and water the critters, she passes by charred rubble where a statue of St. Francis stood for many years. The statue was there after the fire, and Tellem credits the saint for watching over the turtles the couple could not find the morning they evacuated. “St. Francis protected the animals we couldn’t catch,” she says.

Sadly, that property, like so many other homeowners in the fire-ravaged landscape, has recently been targeted by thieves. “We have had to put locks on everything, but I never imagined that someone would steal St. Francis,” Tellem says about a final gut-wrenching loss from this fire. “That truly breaks my heart.”