Insurance Relief for California Wildfire Survivors Passes First Legislative Hurdle

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State Sen Mike McGuire (D-Healdsburg) holds up a stack of paperwork from one of his constituents that comes to just a third of her home contents inventory.  (Courtesy of the California Senate Standing Committee on Insurance)

A package of bills aimed at helping wildfire survivors collect on their insurance settlements passed California's Senate Standing Committee on Insurance on Wednesday. But the reform proposals face tough opposition from the powerful insurance industry.

State Sen. Bill Dodd (D-Napa) challenged committee members to fulfill what he called their “moral imperative” to help fire survivors along the already very long and difficult road to recovery.

“Families pay their insurance premiums year in and year out,” Dodd said. “And when a major disaster strikes, we need the insurance companies to have our back.”

Local leaders like Santa Rosa Mayor Chris Coursey joined firefighters, trade groups and survivors in expressing widespread frustration with the insurance process.

“We simply cannot rebuild in the two-year time frame that we're being asked to rebuild,” Sonoma County Supervisor Susan Gorin testified. She lost her home in Oakmont in the October wildfires.

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“We can't find the materials, we can't find the labor," Gorin said. "And for the 5,000 homes that are lost, most people find themselves underinsured -- minimum $50,000.”

Dodd’s bill, Senate Bill 894, would guarantee that insurance would cover policyholders’ living expenses for three years after a disaster.

After a disaster, there is a large surge in demand for construction labor and materials that makes building costs go up dramatically. Now, many homeowners in the Northern California burn zones are finding themselves severely underinsured and struggling to rebuild.

SB 894 would also allow homeowners who lost their homes in a disaster the flexibility to combine different insurance policies and use that money to rebuild their homes. For example, if someone had a $175,000 policy on a barn, survivors could pull from that policy and use it for their home rebuild.

However, Kara Cross, general counsel for the industry group Personal Insurance Federation of California, testified that this would be like trying to combine apples and oranges.

She said while people might purchase $175,000 coverage for a farm or a barn, in reality they may only own a $20,000 shed. This law would allow them to max out the full $175,000 coverage vs. the $20,000.

Cross said insurance coverage is priced with the understanding that policyholders won’t always max out their limits and that rates might go up as a result of changes.

Insurance industry representative Kara Cross repeatedly told the state Senate Committee on Insurance that proposed changes to existing law would make rates go up.
Insurance industry representative Kara Cross repeatedly told the state Senate Standing Committee on Insurance that proposed changes to existing law would make rates go up. (Courtesy of the California Senate Committee on Insurance)

Committee Chair Steven Glazer (D-Contra Costa) also voiced his concern that because Dodd’s bill is retroactive, it would mean amending or changing the terms of a contract that is already in place, and so might not be legal.

Next, state Sen. Mike McGuire (D-Healdsburg) called on the committee to allow his bill, SB 897, to move forward.

It seeks to address a problem that many survivors find challenging both emotionally and practically: the exhaustive inventory of all their former possessions.

McGuire cited a survey by United Policyholders, which found that 60 percent of North Bay homeowners have yet to settle their contents policy, and that 80 percent have not settled on their structure policy.

“For those who have settled, the outlook is bleak,” he said. “Nearly half of all homeowners are underinsured for their contents.”

Lisa Frizee, a schoolteacher from Santa Rosa who lost her home in the Tubbs Fire, held up a large stack of file folders stuffed with paperwork.

“This stack here represents one third of my house,” she said. “I still have two thirds to go.”

Frizee went on to say that what happened to her and her 85-year-old mother could happen to anyone.

“I hope you never have to experience a 15-minute evacuation in the pitch black of night with no electrical power. Smoke and embers swirling around you,” she said, her voice cracking.

"I hope you never have an indelible image forever branded in your memory of your child running in the yard where you used to joyfully play screaming, ‘We're all going to die!’ And the firemen all yelling, “Get out get out get out now!’ And I hope you never never have to deal with this outright barbaric process designed by the insurance companies in order to limit the amount they need to repay to their loyal customers," Frizee said.

SB 897 would compel insurance companies to pay out 80 percent of policyholders’ contents coverage without that inventory, following a disaster.

But industry representative Cross said again this law could result in rate increases and less choice for consumers across the state.

"I know inventories. It takes a long time to do them,” she said. “Yes, I get that. But it is an important tool.”

Both bills ultimately made it out of committee, with an agreement that the authors would work with Committee Chair Glazer to address industry concerns.