WJames Borrow was 300 miles from Las Vegas attending the Consumer Electronics Show last Tuesday when he noticed his Palisades home was on fire. His house was without power, but a friend suggested he turn on the Tesla remotely and see if the camera showed anything.
From his car camera, he watched in panic as the house went up in flames. Driving home from Las Vegas to Los Angeles, he called his parents and said, I was just looking. ”
Borrow’s first concern was finding a place for his family. The second was insurance. Three months ago, he received a letter from his insurance company, State Farm, saying his fire insurance policy would not be renewed. The letter recommended that he get fire insurance through the California Fair Plan, which was created by lawmakers 50 years ago to help people with no other insurance options. “The end result was a 400% increase in premiums,” Borow says. “It was expensive, but it wasn’t that complicated.”
Borrow was one of 1,626 State Farm customers in the Palisades area whose fire insurance had not been renewed at the end of 2024, according to the California Office of Insurance. They accounted for about 70% of State Farm’s market share in the Pacific Palisades, according to the San Francisco Chronicle.
Like Borow, some people who purchased insurance found it through Fair. For other insurance companies, prices were inflated or the specific fire protection requirements issued by the new insurance company were prohibitively expensive.
Frances Bischetti told the Los Angeles Times that Farmers Insurance, another major insurance company, planned to increase homeowners insurance on her Pacific Palisades home from $4,500 to $18,000 last year. He was told there was one, but said it was out of his budget. He said he was unable to get a fair plan because 10 trees around his house would have to be cut down, which would also cost a lot of money. His house burned down and he didn’t have insurance.
Experts predict finding fire insurance for homes in high-fire-risk areas will become even more of a challenge for Californians. Michael Coffey, an insurance defense litigator who handles large-scale insurance cases around the world, said he expects more insurance companies to leave the state and force premium increases for all insurers. speak
That would force more Californians to make heartbreaking choices: pay up, live in uninsured homes, or move elsewhere.
More than 450,000 California homeowners were insured through Fair Plan in 2024, more than double the number in 2020. Even for those who can afford insurance, the plan comes with uncertainty.
According to U.S. Sen. Alex Padilla’s office, as of last Friday, Fair Plan had only $377 million available for claims, and insurance covers basic property damage in the $3 million range. It only covers.
It’s too early to know whether Fair has enough reserves to pay the billions of dollars it could soon pay. Last year, FairPlan Chairman Victoria Roach told the California Legislature that the system was one major event away from bankruptcy. “There’s no other way to say it because we don’t have the cash on hand[to pay all the bills]and we have a lot of exposure.”
“Fairplan is run by the government, so I’m sure the government will try to come up with a bailout,” Coffey said. “But unfortunately, that cost will be borne by the entire state or federal taxpayers.”
In the short term, Los Angeles County Insurance Commissioner Ricardo Lara announced a temporary move to prevent insurance companies from canceling or nonrenewing home coverage for Los Angeles wildfire victims in affected ZIP codes for the next year. He said he had exercised his suspension powers.
The state has been looking for long-term solutions as insurance markets are overburdened by disasters triggered by the climate crisis. New regulations that took effect this month allow insurers to take the climate crisis into account when setting prices, but many insurers have said this is the reason they are pulling out of the state’s insurance market. California previously did not allow insurance companies to consider current and future risks when deciding how to set premiums.
Coffey says the government can’t blindly provide insurance for people’s homes. “That’s not something the government can get involved with,” he says. “The cost is too high and the system is economically overwhelmed.
“If people think it’s expensive to live in California now, I think they should understand that the price is based on risk,” Coffey said. “And California has a lot of insurance risk between earthquakes and wildfires, so you’re going to have to pay more premiums.”
Average homeowners insurance premiums rose more than 30% in California and across the country between 2020 and 2023, driven by climate-related disasters and rising home construction costs, according to the Brookings Institution. In Florida, the government-run Citizens Property Insurance Corp. (Fair’s version) is one of the state’s 10 largest home insurance companies.
Borough is hopeful that Fair will pay the bill and that State Farm will provide additional funding.
Coordination between State Farm and the fair was extremely difficult, he said. “There are so many unknowns. No matter what questions I ask over the phone, the person in charge will say, “Honestly, I don’t know.” I’m trying to find the answer. So no one knows what the hell is going on. ”
In California, even before the fires, it could be difficult to get companies to pay insurance claims. In 2023, the state’s three home insurance companies denied nearly half of claims, which was higher than the national average. L.A.-based Farmers Insurance topped the list, rejecting about 50% of claims, the LA Times reported.
Borrow hopes he can eventually rebuild his home in the Palisades. That would be the best case scenario. ”
