SACRAMENTO, California — Before a blaze destroyed their street in northwest Altadena, Louise Hamlin and Chris Wilson lived next door to each other in very similar houses.
“I picked an old house in an old neighborhood because it has character,” said Hamlin, a 51-year-old single mother with a teenage son. She bought her 1,500-square-foot home 10 years ago.
Today, gone are their charming English-style houses built in 1925 with welcoming porches and Palladian windows. There is hardly anything remaining of their ancient neighborhood among the rubble and ashes.
In the weeks since the Eaton wildfire took their homes, Hamlin and Wilson have been stumbling through the layers of business, bureaucracy, and mental trauma of surviving a natural disaster, with their sights firmly set on rebuilding.
The way they rebuild shows a mix of good and bad outcomes, highlighting the country’s serious home insurance problems. Her insurance has paid almost a million dollars, and she is looking for workers. He is thinking about getting loans, dealing with cases, and moving his family out of California.
“It changes everything in your life,” said Wilson, 44, who bought his house five years ago with his wife, who is six months pregnant with their first baby.
Hamlin’s house was privately covered by Mercury Insurance, but Wilson was forced onto the California Fair Access to Insurance Requirements Plan — the state’s bare-bones insurance program — when SafeCo failed to renew his policy last May. The FAIR Plan provides insurance for people who can’t get private coverage but need it for their debt.
As wildfires, storms, and other natural disasters happen more often because of climate change, many homeowners have trouble finding or paying for private insurance. This problem is especially serious in California, where some big insurance companies are no longer offering new plans or are not renewing current ones.
State officials have started implementing new rules to encourage insurance companies to remain in California. The aim is to help as many people as possible move away from the FAIR Plan.
FAIR has high costs and basic coverage. It was meant to be a short-term solution for people until they can find a better insurance choice. From 2020 to 2024, the number of FAIR Plan residential insurance more than doubled, hitting almost 452,000 last year.
Wilson and Hamlin’s similar mending experiences serve as a warning. Wilson paid about 60% more for fire insurance than Hamlin, but he received less than half the coverage.
“That’s why a lot of people call it ‘The Unfair Plan.’” said Amy Bach, executive head of the consumer advocacy group United Policyholders.
Liberty Mutual, SafeCo’s parent company, said it can’t discuss individual policies but recognized that there have been “difficult but necessary business decisions” in California.
Janet Ruiz, a representative for the Insurance Information Institute, which speaks for many big insurance companies, said that California is lucky to have the FAIR Plan, which must take all applicants. Ruiz said the results would be much worse if homes didn’t have any insurance.
Insurance Commissioner Ricardo Lara said California is trying to ensure that all claims get paid. He stated that his office is trying to help residents leave the FAIR Plan and return to regular, more complete insurance coverage.
A spokesperson for FAIR Plan did not comment on Wilson’s case and said it’s hard to compare different plans and their coverage.
Thousands of people lost their homes due to the Eaton and nearby Palisades fires, which were some of the most damaging in California’s history.
The FAIR Plan said it hired more staff to handle the increased demand and has a way to pay all covered claims. According to state data, over 31,000 claims related to wildfires have been made as of last week, including about 4,400 claims under the FAIR Plan.
Hamlin had regular home insurance that cost $1,264 a year when the fire happened. She can get up to $1.5 million to replace her home, other buildings, and personal belongings. This includes up to $303,000 for living costs while she is displaced. Her insurance gives her coverage that could provide over $200,000 to help her rebuild.
Wilson pays a $2,000 fee for the FAIR Plan, which will pay him a maximum of $686,000. This amount includes $100,000 for living costs if he has to move out of his home.
Wilson also had to buy “wrap-around insurance” for $1,500 a year for problems the FAIR Plan doesn’t cover, such as burst pipes or falling objects. That extra plan doesn’t cover fire damage.
Hamlin said that Mercury has been very helpful. They quickly sent her money and assisted her with things like finding a place to live and getting prices from contractors. Within days, the company wired her tens of thousands of dollars to get started while the process fell into place.
Hamlin said that getting a good night’s rest and waking up ready to handle everything is very important.
Meanwhile, Wilson has had a hard time talking to someone from the FAIR Plan. There was no communication in the first two weeks. The contact information was wrong, phone numbers didn’t have messages, and emails were returned.
“Half the time, I feel like I’m doing something wrong,” Wilson said.
After The Associated Press asked for a response, Insurance Department spokesman Michael Soller stated that someone would get in touch with Wilson directly.
Wilson said he feels troubled by his decisions. He believed he had bought a property in a safe area, so he didn’t look for homes in a neighborhood further north after learning that people there were losing their insurance coverage.
Hamlin knew about the fire risks when she moved in. She used to live in Pasadena and was surprised that State Farm, her insurance company at the time, did not provide coverage in Altadena. She picked Mercury because it was the least expensive choice and was thinking about getting better service.
“I might have been let go when Chris was let go.” Anyone of us could be at any time. It’s just a matter of luck. Hamlin said in shock, “I didn’t do anything right or wrong.” “I had the same risks as everyone else.”
Stephen Collier, a professor of urban planning at UC Berkeley, explained that the odd way people are dropped from insurance often relates to the confusing risk models used by insurance companies.
“They’re all trying to limit their risk,” Collier said. “When it comes to wildfires, you don’t want to be in a place where the smoke is thick.”
Wilson said SafeCo asked to inspect his property before they decided not to renew his insurance. He was scared and tried to barter with them, offering to clear brush, trim trees near the roof, and do other things to prevent wildfires, but he was not successful.
Wilson tried hard to find a good insurance deal with his agent, but he was unsuccessful. He decided to go with the FAIR Plan, hoping he would finally find private insurance later.
There was another problem: Wilson said he couldn’t get full replacement cost coverage with the FAIR Plan because his roof was too old. Instead, he ended up with what is known as “actual cash value” coverage, which greatly limits the payout based on the real depreciation of what was lost.
Bach from United Policyholders said, “We’re talking about hundreds of thousands of dollars, and that hurts.”
In 2023, seven of the top 12 insurance companies stopped or limited new business in California due to increasing fire risks and other issues. State rules allow insurance companies to increase prices more easily when they sell policies in high-risk places. This includes factors like climate change, and they may pass some of the costs of reinsurance onto customers.
However, Dave Jones, who was California’s insurance commissioner from 2011 to 2018, said those are just temporary fixes. He highlighted Florida, where officials have followed all the requests from insurers that California was asked to meet, but it has not worked out well.
“We are heading towards a future where we can’t get insurance in the United States because we aren’t taking quick enough action to address the main issue, which is climate change,” Jones said.
Unless governments help pay for important measures to reduce fire risks, California homes will continue to bear the unequal costs, according to Collier from UC Berkeley. This could mean that people like Wilson, who don’t have enough insurance, have to deal with their losses. It could also mean that all homes in California face higher insurance costs, or it could be a combination of both situations. State Farm, the biggest insurance company in California, asked the state this week to accept a 22% emergency rate increase for homeowner policies starting in May. This request comes after they handled nearly 8,700 claims and paid over $1 billion to policyholders due to the LA fires.
“There is a lot of risk involved, and it’s unclear who will cover the costs,” Collier said.
Wilson thinks he will need to get loans to rebuild. He is thinking about joining a case against Southern California Edison, claiming that the company’s equipment started the fire, in the hopes of getting some money as a settlement.
Wilson said that with a baby coming, he can’t imagine staying in a state of uncertainty with the FAIR Plan forever. If he can’t find private insurance, he is considering moving out of California.
“I don’t want to face the possibility of losing everything again,” Wilson said. “You’re paying for insurance that doesn’t help you.” You should avoid living in a dangerous area. “You don’t have backup.”
Leave a Comment