| Business: Wildfire areas get insurance break
State says policies can’t be dropped for a year
The California Department of Insurance on Wednesday issued a list of 518 ZIP codes within or adjacent to this year’s wildfires where insurers cannot cancel or refuse to renew a homeowners or renters policy for one year because of wildfire risk.
The list covers about 2.1 million policyholders, or 18% of California’s residential market, the department said in a news release. It includes ZIP codes in every Bay Area county except San Francisco that were in or near the Glass, Coyote or Woodward fires or the CZU, SCU or LNU lightning complex fires. Of the 518 ZIP codes, 97 are in the Bay Area, with 26 in Sonoma County.
The moratorium comes at a time when many insurers are reducing their exposure to California because of growing wildfire risk. They declined to renew nearly a third more homeowners policies in California in 2019 than they did in 2018. In the 10 counties with the highest exposure to wildfire risk, nonrenewals surged by 203%, the department announced last month.
The insurance department’s ZIP code announcement implements SB824, which took effect in January 2019. It applies to homes in any ZIP code within or adjacent to the perimeter of a declared wildfire disaster that were not destroyed. It prohibits insurers from canceling or refusing to renew customers in these areas, for one year, based solely on the fact that the home is in or near an area where a wildfire occurred. Insurers can cancel or refuse to renew for other reasons, including nonpayment of premiums or willful or grossly negligent acts or omissions by the policyholder that materially increase the risk to the property.
A different law, SB894, applies to homes destroyed by a disaster. It requires insurers to offer to renew the policy at least two times, or three times if the policyholder encounters unavoidable delays in rebuilding.
The ZIP codes are determined by the Department of Forestry and Fire Protection, in consultation with the Office of Emergency Services.
Insurance Commissioner Ricardo Lara implemented this law for the first time in December, after last year’s wildfires. It applied to at least 800,000 policyholders. About
364,000 of them are also included in this year’s list and will get an extra year of protection.
The law applies to both stateregulated insurers and unregulated ones, often called surplus lines carriers.
The oneyear period starts on the date the governor declared an emergency for that ZIP code. Nonrenewal requires a 75day notice, and cancellation requires a 45day notice.
“So this means the earliest that someone included in the moratorium could be nonrenewed is one year plus 75 days from the pertinent Governor’s emergency declaration, and the earliest that some could be canceled is one year plus 45 days,” department spokesman Michael Soller said in an email.
“That also applies to last year’s moratorium, which followed from the Governor’s three emergency declarations in October 2019.”
In a joint statement, American Property Casualty Insurance Association and Personal Insurance Federation of California said, “We anticipated a new moratorium on nonrenewals would be triggered by the historic, destructive, and deadly 2020 wildfires.
“The effects of increasingly frequent wildfires include a significantly higher risk of homeowner property damage and we need to adapt to this new reality.”
The two groups added: “While changing the trajectory of climate change will take time, we need to take action now to make our communities more resilient and protect the lives and property of all Californians. This includes making sure homeowners have access to comprehensive insurance. It is important that we work together on solutions that increase insurance availability in highfire risk areas and protect against insurer insolvency.”
⏩ For a list of ZIP codes included in this year’s list, go to bit.ly/carenewalzipcodes
⏩ For a list covered by last year’s moratorium, go to bit.ly/ca2019moratorium