Residents in areas affected by homeowner’s insurance non-renewals may have a glimmer of hope.
The State of California’s answer to rising non-renewals starts with eight bills – Senate Bills 182, 190, 295, 240, 508, 824 and Assembly Bills 38 and 1516. SB 508 and 824 have already passed, signed by Governor Gavin Newsom on July 20, 2019 and September 21, 2018 respectively.
SB 508 requires insurers to provide a copy of the California Residential Property Insurance Bill of Rights to renters and residents of condominium units. The bill also targeted owners of manufactured and mobile homes, requiring the CRPIBR and the California Residential Property Insurance Disclosure be provided to them, as well.
However, SB 824 hits a little closer to home for upcountry residents. It prohibits insurers from canceling or refusing to renew a residential property insurance policy for one year after the declaration of a state of emergency based solely on the fact that the insured structure is located in an area or near an area where a wildfire has occurred. SB 824 also requires insurers with premiums over a specific amount to submit a report on fire risk information on written policies to the commissioner by April 1, 2020 and every two years thereafter.
The remaining bills affect homeowners more directly, with changes to defensible space standards, building codes, tax returns and even home sales. On a broad level, SB 182 would require community-level standards on cities and counties through the general plan. The bill, if passed, calls for the specific identification of high fire risk areas within their respective jurisdictions, to make findings and create standards to mitigate wildfire risk, amend zoning ordinances and review land use planning in the identified areas.
Additionally, SB 182 would establish the Wildfire Risk Reduction Planning Support Grants Program, administered by the Department of Forestry and Fire Protection, to provide small jurisdictions with grants for planning activities to meet the new requirements. DFFP would be required to distribute $3 million via a “non-competitive, over-the-counter process” to small areas, with an authorized 5 percent of any distributed funds for administration costs.
On the homeowner level, SB 190 would require new defensible space standards to be updated whenever substantial new information is submitted to the Office of the State Fire Marshal. As part of the defensible space standards, a list of products that comply with fire safety building standards would be created and regularly updated in conjunction with a list of low-cost retrofits for existing structures. SB 190 would also require amendments be made to existing building standards.
SB 190’s counterpart, AB 1516, is also aimed at defensible space, requiring more aggressive fuel reduction within 35 feet of structures. Homeowners would be required to create an ember-resistant zone within 5 feet of their structures and drastically reduce fuel within the 5- to 30-foot zone of their overall 100-foot defensible space. Violating these provisions would be considered a crime. AB 1516 will also require a training program be developed for anyone assessing and reporting on home hardening and defensible space.
The bill doesn’t stop there, requiring the development of an online guidebook regarding vegetation that cannot be near overhead conductors and requiring the DFFP to assist cities, counties and special districts in preventing high-intensity wildland fires through fuel management and wildfire consultation. To help with these updates and the vegetation management, the state is seeking to provide relief through tax returns.
According to parties within the insurance industry, who spoke under the condition of anonymity, they don’t believe building code and defensible space standard changes will make much of a difference, stating that some homeowners have spent thousands of dollars on meeting their insurance company’s requirements and have still been dropped; and additionally, some companies have stopped insuring entire zip codes, themselves dealing with 700 non-renewals and climbing.
They went on to lament that the long-term outlook for homeowners in high and very high risk zones seems bleak, elaborating on some local confusion with Cal Fire and insurance companies. They stated Cal Fire and the insurance companies are two separate entities, meaning a clear bill of health from Cal Fire doesn’t equate to one with the insurance company.
SB 295 would establish the Fire Safe Home Tax Credit, allowing up to $2,500 in credit for homes located in moderate fire hazard severity zones. Homeowners would be eligible for up to $5,000 and $10,000 for homes in very high fire hazard zones. The California Department of Insurance has identified 10 counties with the highest number of homes in the high or very high risk areas – Amador, Calaveras, Tuolumne, Alpine, El Dorado, Mariposa, Plumas, Sierra, Nevada and Trinity counties.
However, homeowners looking to sell in a high or very high risk area may be looking at additional hurdles, beyond the other updates. AB 38, among other requirements, would require the seller of any real property located within the high and very high risk areas to provide a disclosure to a buyer if the home was constructed before January 1, 2020. The disclosure would have to contain a list of the fire hardening improvements made to the property and any vulnerabilities to wildfire and flying embers.
The disclosure would include a list of the State Fire Marshal’s list of low-cost retrofits and be provided in conjunction with a final inspection report. This bill would also potentially provide financial assistance to retrofit existing residences, commercial and public properties. On a more broad scale, AB 38 would require the development of a comprehensive wildfire mitigation program to foster cost-effective structure hardening and retrofitting to build fire resistant homes, businesses and public buildings.
Aimed at insurers, SB 240 targets training for independent insurance adjusters following a disaster. The bill would require a non-licensed adjuster to be registered within 15 days of when they start adjusting claims. It will also mandate insurers to designate a primary point of contact for claims, with at least one way to communicate directly with them, who would have to remain assigned to the claim until it is closed or litigation is filed.
According to the CDI, zip codes affected by big fires, like the Butte Fire in 2015 and the Thomas Fire in 2017, had a 10 percent increase in non-renewals for 2018. Data also showed the availability of homeowners insurance dropped significantly in high-risk counties, showing a fall of new and renewed policies by 8,700 in the 10 counties with the most homes in high and very high risk zones. The same 10 counties also saw a 177 percent increase in FAIR Plan policies during the same time. However, the effects of non-renewals and wildfires may not be fully known until later in 2019.