As California burns, lawmakers reject wildfire-safety funds and homeowners insurance relief
When David Montagne and his wife, Michele, retired to rural Penn Valley in 2008, they paid $1,200 a year for homeowners insurance.
About six years ago, they got their first letter telling them they’d been dropped from their insurance plan because they were in a part of Nevada County that had substantial fire risks. Multiple letters followed.
They struggled to find a carrier. At one point, they received a quote for $16,000 a year. Finally, this summer they got coverage through the California FAIR Plan — the state’s “insurer of last resort.” They now pay $6,500 a year. While they can afford a five-fold increase in their rates, David Montagne fears many of his neighbors have little choice but to go uninsured.
“I’m sure some of them are going without,” he said. “I think it’s unavoidable.”
As smoke from wildfires left Sacramento cloaked in a haze, the Legislature ended its session early Tuesday without taking significant action to reduce the state’s enormous fire risks – or to address the crisis that has left thousands of rural Californians struggling to find affordable homeowners insurance.
A bill that would have raised $2.5 billion from utility ratepayers to “harden” homes and curb other wildfire hazards died without legislative action. A second bill, requiring insurers to cover homeowners who’d taken action to protect their properties against fire, also died.
“While Governor Newsom and the Legislature have made progress in reducing wildfire risks on public lands over the past year, insurance must play a much larger role in protecting Californians in their homes and communities,” said Insurance Commissioner Ricardo Lara, who pushed for the legislation requiring insurers to cover homeowners.
Lara said he would continue to advocate for statewide home-hardening standards “to reduce the spread of wildfires into communities and bring down statewide wildfire risk.”
The bill that Lara backed, Assembly Bill 2367, failed to advance out of committee this spring. It would have required insurers to sell coverage to homeowners who’d taken steps to “harden” their homes such as fireproofing their roofs and retrofitting vents to prevent embers from blowing inside and clearing brush around their properties.
Legislative leaders also derailed Assembly Bill 1659, introduced last week by Assemblyman Richard Bloom, D-Santa Monica. The bill would have raised $2.5 billion to pay for a variety of wildfire-risk needs. It would have earmarked $300 million for “home hardening” and “defensible space” projects to safeguard homes in wildfire zones.
Insurance lobbyist Mark Sektnan said AB 1659 would have helped tamp down fire risks – and possibly made insurers more willing to sell policies in fire zones.
“That would have been a positive sign that the state is serious about managing its forests,” said Sektnan, vice president of the American Property Casualty Insurance Association.
Fires cripple insurance companies
Sektnan said 98% of Californians still get coverage from traditional carriers. But the market has broken down in recent years in wildfire-prone areas, following the wine country fires of 2017 and the Camp Fire of 2018.
Insurers argue that they aren’t being allowed to charge high enough rates, given the massive wildfire threats facing California’s mountain and foothill communities. The result has been an exodus by traditional insurance carriers from many of California’s hot spots, leaving tens of thousands of mostly rural residents to find replacement coverage from non-traditional sources that are far more expensive.
From 2015 to 2018, 348,000 homeowners in fire zones lost their insurance coverage. That included 88,187 in 2018 alone. State insurance regulators said they believed 2019 would be even worse because it would include a flood of non-renewals following the Camp Fire. Last year’s numbers are still being tallied, Lara’s office said.
Claims from the November 2018 disaster, the deadliest wildfire in California history, put a small Merced County-based insurer out of business.
In December 2015, the FAIR Plan – which was created years ago by the Legislature but receives no state subsidies – had 130,827 policies in place. As of a month ago, some 200,415 homeowners were relying on the FAIR Plan.
State officials do have stopgap tools to keep some Californians from losing insurance coverage. Last December, Lara imposed a one-year moratorium that prohibited carriers from dropping policyholders living in the vicinity of the 2019 fires. A bill he authored while he was a state senator made the moratorium possible.
Sektnan said the commissioner has informed the industry that he plans to impose another year-long moratorium covering the regions affected by this year’s rash of fires.
But industry officials say moratoriums won’t cure the long-term ills afflicting the insurance market – problems that can probably only be solved by reducing the state’s fundamental fire risks.
But AB 1659 – with $2.5 billion aimed at lowering the state’s risk profile – petered out not long after it was introduced last week.
It faced too much opposition over how the Legislature intended to pay for it: extending a 96 cents-a-month surcharge on customer bills at the three investor-owned utilities: PG&E Corp., Southern California Edison, and San Diego Gas & Electric.
The surcharge, a legacy of the 2001 energy crisis, has already been extended for 15 years, to 2035, to help finance a wildfire insurance fund for the utilities. This would have kept the charge in place until 2045.
PG&E said it was unfair to make its customers foot the bill for projects that had nothing to do with their energy usage. The bill included funding to repair irrigation canals in the San Joaquin Valley. While environmental groups largely supported the bill, some consumer groups opposed it.
The only major fire-related bill that passed at the tail end of the legislative session was Senate Bill 182, by state Sen. Hannah-Beth Jackson, D-Santa Barbara. Her bill would impose restrictions on new development in the “very high fire hazard severity zones” – the riskiest areas as designated by the state’s fire agency, Cal Fire.
It doesn’t prohibit developments, but the bill prohibits local governments from approving them unless local agencies determine that buildings would be better protected from wildfires.
Newsom’s wildfire agenda
Gov. Gavin Newsom, who has made reducing the state’s wildfire threat a priority of his administration, said the legislature did the best it could with a budget that had been hammered by the COVID-19 crisis.
“In the midst of an unprecedented drop in revenue, the Legislature came together to pass a budget that funded key priorities – protecting key investments in wildfire protection and disaster response and targeting more than $5 billion in emergency aid to help kids most at risk of learning loss due to the COVID-19 pandemic,” Newsom said early Tuesday in a statement.
Since Newsom took office in January 2019, the state has spent nearly $500 million expanding Cal Fire’s personnel and equipment. He signed a bill requiring PG&E Corp. and the other major utilities to spend a combined $5 billion on wildfire safety.
But other Newsom wildfire priorities haven’t gotten traction.
For instance, earlier this year Newsom proposed spending $100 million to help communities in fire-prone areas harden homes. The proposal followed a McClatchy investigation that found homes built after 2008 — when strict fire codes took effect in wildfire country — survived the Camp Fire in Paradise at a far greater rate than older properties.
Meanwhile, experts say California and the federal government have millions of acres of land that remain substantially at risk from a devastating wildfire, a problem that continues to worsen as the climate warms.
In August the state signed a memorandum of understanding with the Trump administration that aims to reduce fire conditions on 1 million acres of forest and rangeland each year by 2025 — roughly doubling the current amount of treatments. But even achieving that ambitious goal would still leave millions of acres vulnerable.
California has 33 million acres of forests, plus another 15 million acres of grassland and scrubby terrain called chaparral, the dense brush that surrounds many foothill communities up and down the state.
That’s 48 million acres, nearly half the state’s total landmass, at considerable risk of burning. Cal Fire says millions of Californians live in areas that are prone to significant fire risk.
David and Michele Montagne are among them.
A retired marine biologist, David Montagne said he understands that a $1,200 annual premium – for a home in the brushy tinder-dry foothills of Nevada County – was probably a bargain the insurance companies couldn’t afford.
But the $16,000 he was quoted went too far the other direction, he said.
“Now, that’s nuts in a different way,” he said.
