California Temporarily Bans Insurers From Dropping Policyholders in Wildfire Areas

California’s insurance commissioner on Thursday issued a one-year ban on insurers dropping policies on homes, rentals and businesses in wildfire-damaged areas. He also called on insurers to voluntarily stop dropping policyholders solely for wildfire risk reasons.    

“I am calling on insurance companies to push the pause button on issuing non-renewals for one year,” the commissioner, Ricardo Lara, said in statement, “to give breathing room to communities and homeowners while they adapt and mitigate risks, give the Legislature time to work on additional lasting solutions, and allow California’s insurance market to stabilize.”

Lara invoked a law he wrote last year, as a Democratic state senator. The law prohibits insurers — for a year after a state of emergency had been declared — from canceling or refusing to renew insurance policies for residential property solely because a building is near a wildfire burn area.

California Gov. Gavin Newsom, a Democrat, declared a state of emergency in October, citing wind-fueled fires sweeping the state. 

In many fire-prone Western states, it’s becoming more difficult to insure properties surrounded by forest, reachable only by backroads, or on slopes where a wildfire is likely to run. Insurance companies often require homeowners to cut back trees and undergrowth.

The problem may be most acute in California, where in recent years wildfires have flattened neighborhoods and the town of Paradise.

The California Department of Insurance in August reported a 6% one-year increase in insurers dropping policies in sparsely populated areas where the state has primary fire-fighting responsibility. In ZIP codes affected by major wildfires in 2015 and 2017, insurer-initiated non-renewals jumped by 10% last year, the agency said.

The moratorium will cover at least 800,000 homes, the department said.