By Shant Karnikian
Raging wildfires—driven by blow-torch Santa Ana winds at hurricane forces and extremely dry weather—have devastated Los Angeles over the last week. Blazes in the Altadena (Eaton Fire) and Pacific Palisades (Palisades Fire) communities are among the worst natural disasters in the city’s history.
Tens of thousands of residents are displaced — including those temporarily evacuated from zones that remain hazardous, as well as thousands who have lost their homes and belongings entirely in neighborhoods that have been reduced to ashes. At the latest estimate, 12,300 structures, including houses, schools, and businesses, have been destroyed by the blazes. At least 24 people have died, and many others are still reported missing. Estimates of the total economic damage currently range from $250-275 billion, including about $30 billion in insured property loss.
Tragically, for many families that have already suffered such traumatic damage and loss and are desperate to begin rebuilding their lives, this may be only the beginning of the nightmare.
Increasing danger
Extreme weather events and natural disasters are on the rise due to climate change. In California, a long rainy winter produced abundant vegetation that dried out through a scorching summer (the hottest in 130 years) and months of drought, providing fuel that could quickly ignite and allow flames to spread at a deadly pace during the most intense wind storm in 14 years.
According to data from the Insurance Information Institute, the Golden State currently has 1.2 million homes at extreme risk from wildfire. Property owners and renters in vulnerable areas rely on home insurance for protection.
Yet major insurers, citing rapidly rising costs and risk, have been pulling out of California over the last two years and introducing sharp rate increases. Some customers in vulnerable areas have already seen their premiums soar by upwards of 600%.
Residents throughout California face a mounting crisis of fire insurance affordability and availability. Insurance industry insiders argue that an intense and unprecedented period of fire disasters over several years — even prior to last week’s catastrophe — has stressed insurance companies to the brink.
An insurance crisis
In March of 2024, nine months after announcing it would no longer issue new policies in California; State Farm abruptly canceled existing policies for 72,000 households.
This past July, the insurance giant also discontinued 1600 policies in the Pacific Palisades, an area that was virtually wiped out in last week’s fire, California Department of Insurance spokesman Michael Soller told CBS News. At the same time, the company terminated 2000 policies in other LA neighborhoods that the Palisades Fire, including Calabasas, Hidden Hills, Monte Nido, and Brentwood, now threaten.
Over the summer, State Farm asked the California government to greenlight a steep rate hike. According to its filing with California’s Department of Insurance, the insurer wanted to increase homeowners’ insurance policies by 30%, condo policies by 36%, and renters’ policies by a whopping 52%
State Farm is not alone. Other insurance powerhouses, including Allstate and Farmers, have also left California homeowners in the lurch by dropping policies or stopping underwriting.
Faced with skyrocketing private insurance costs (or the unavailability), homeowners in high-risk regions are left with few choices, none of them ideal. Some acquire a policy through the California Fair Access to Insurance Requirements Plan or FAIR Plan, a last-resort, stop-gap plan offering only basic coverage at high premiums. Others have been priced out of insurance altogether and have taken the serious risk of going without.
FAIR plan data indicates that Pacific Palisades homeowners have increasingly chosen the minimal policy. Approximately 1,400 of the community’s 9,000 homes (about 1 in 7) were covered by FAIR in 2024, more than four times the number in 2020.
But according to the New York Times on Tuesday, at the time of last week’s fires, “the California FAIR Plan… had just $377 million available… to pay claims that could reach billions, officials said.”
It’s important for homeowners to understand the FAIR plan and be aware of its limitations:
- FAIR is not the same as insurance. FAIR is a property insurance pool operated by a private association.
- FAIR policies can be hard to acquire. Currently, demand is far outpacing availability, and there are strict qualifying criteria.
- It only covers fire, lightning, internal explosion, or smoke damage.
- The $3 million cap for residential policyholders may not cover total loss/rebuild.
- It does not include other important kinds of coverage, such as liability, medical payments for injury in the incident, theft/vandalism, other weather events, falling objects, or electrical surges.
If FAIR is your only option when purchasing insurance, it can be helpful to supplement with other forms of coverage such as personal property (for destroyed belongings), additional structures (barns, fences, sheds, garages), fire debris removal, landscape restoration, earthquake insurance, flood insurance.
Navigating your insurance claim after a fire
Wildfire claims can be very complex and feel overwhelming in the aftermath of a disaster — especially if you are underinsured.
- Whatever insurance you have, whether or not you’re concerned that you are underinsured, make sure you obtain a copy of your complete policy. Review it carefully.
- Consult with a knowledgeable and experienced attorney. Seek legal assistance early in the process—before filing your claim. Your lawyer can advocate for you, analyze and address every aspect of your claim, help you build a strong case, identify overlooked benefits, navigate disputes with your insurer, ensure your rights are protected, and help maximize your claim.
- Prioritize your health. Wait until it is safe to return to your property.
- Document everything. When you are able to visit your home, take photos and videos of all the damage. You will likely need professional help, such as appraisers and structural engineers, to assess the full extent of the damage. Your lawyer can help connect you with the proper experts. Also, save all receipts related to the disaster, including your temporary housing.
- Take detailed notes and keep records of every interaction with your insurer: letters, emails, calls, names of representatives, and so on.
- Do not feel pressured to accept an initial assessment or lowball offer, especially if you are not yet working with a lawyer.
Insurance bad faith
It is in times of tragedy and dire need that people depend most on their insurance plans. Unfortunately, insurance carriers often use unfair, manipulative, and deceptive practices against policyholders at such times—attempting to delay, deny, or minimize payouts of valid claims, sometimes through illegal means. “Insurance bad faith” comes in many forms, including but not limited to:
- Making lowball offers
- Misrepresenting terms
- Manipulative interpretations of contractual language
- “Fine print” / nondisclosure of limitations or exclusions when the policy was sold
- Requiring unreasonable proof of a loss
- Failing to conduct a fair investigation
- Delaying resolution
The experienced, dedicated, and compassionate attorneys at Kabateck LLP are committed to helping wildfire victims get the compensation they need and deserve as they begin to rebuild their lives after a natural disaster. If your home was lost or damaged in the Los Angeles fires, we’re here to help.