CA's Insurance Commissioner Imposes Ban on Policy Cancellations Amid Wildfires

California’s insurance commissioner has imposed a year-long ban on insurance policy non-renewals and cancellations as shellshocked Angelenos contend with multiple wildfires raging in Southern California.

The order by state Insurance Commissioner Ricardo Lara protects homeowners inside the perimeters or adjoining ZIP codes of the Palisades and Eaton fires burning in Los Angeles County for one year following Gov. Gavin Newsom’s Jan. 7 emergency declaration, regardless of loss.

“Our top priority is protecting Californians during this crisis and helping us to recover,” Lara said in a statement announcing the moratorium.

“I am using my moratorium powers to prevent insurance companies from canceling or non-renewing policies in wildfire-impacted areas so people don’t face the added stress of finding new insurance during this horrific event.”

More than 9,000 structures are damaged or destroyed; 10 people are dead in the ferocious, wind-swept infernos that have savaged the south state since Tuesday. Losses are expected to be at least $50 billion.

The largest of the fires, the Palisades Fire that ravaged Pacific Palisades and parts of Malibu; and the Eaton Fire to its east that tore through Altadena and Pasadena; are now among the most destructive in California history and still far from containment even as thousands of firefighters work around the clock to defeat the flames.

The firestorms and the ruined communities left in their wake come amid a worsening insurance crisis in a state where destructive wildfires are commonplace and where more and more insurers are concluding insuring California homeowners is not worth the risk.

Some of the nation’s largest firms including a number of California’s top insurers, Allstate, Farmers, State Farm, USAA and Nationwide, had stopped accepting new policy applications, raised wildfire safety standards, sharply increased rate costs or are leaving the state altogether.

Allstate lost a half-billion in 2018 after two of California’s most devastating blazes, including the deadly Camp Fire in Paradise. It later shrank its coverage footprint statewide in response, calling the state “catastrophe-prone.”

Insurers shed tens of thousands of California policies following calamitous wildfires in 2017 and 2018, with many finding their way to the California FAIR Plan, the state’s insurer of last resort. The plan provides basic fire insurance coverage when that coverage isn’t available from traditional carriers.

Chicago-based Allstate stopped issuing new California policies in 2022, citing wildfires and rising costs to rebuild, but returned to the market last summer. In August, Allstate received permission from state insurance regulators to boost California homeowners’ premiums by an average of 34%.

The insurer said the rate hike would continue to safeguard homeowners while Allstate worked with Lara’s office to make more coverage available and its market more sustainable for the state homeowners.

The voter-approved Proposition 103 was enacted in 1988 and hailed then by consumer advocates as a shield against excessively costly premiums. But carriers have been able to work around the decades-old provision by declining to write new policies.

Other insurers including State Farm have also requested rate hikes from state regulators. The Illinois-based carrier was granted permission for a 20% rate increase earlier in 2024.

It’s not the first time Lara, who was re-elected to the post in 2022, has imposed a moratorium. In 2021, Lara barred insurance companies from dropping nearly 210,000 homeowners in the path of wildfires, one in a series of orders to address the shortage of coverage in areas prone to fires.

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Visit the Merced Sun-Star (Merced, Calif.) at www.mercedsunstar.com

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