AYESHA RASCOE, HOST:
The wildfires that swept through Los Angeles neighborhoods last January took 30 lives and burned thousands of homes. The owners of homes that survived the flames considered themselves the lucky ones. Not anymore - the heat and smoke were so intense in places that layers of toxic chemicals were left behind. Yet many homeowners say that insurance companies are telling them they aren't required to cover the damages.
To better understand the situation, we called up David E. Jones, who served as California's insurance commissioner from 2011 to 2018. Good morning.
DAVID E JONES: Good morning.
RASCOE: So let's start with what many homeowners found when they went back to their homes after the Eaton and Palisade wildfires. There was a lot of damage there, right?
JONES: That's right. Those whose homes were still standing oftentimes found the interior and exterior of the home and their property was covered by a layer of debris and ash. What oftentimes happens is the debris and ash contains materials like asbestos, heavy metals, chemicals and other hazardous substances, and so it's critically important that homeowners and business property owners have the opportunity to have that investigated by their insurance company and the insurance company cover it.
RASCOE: Why are insurance claims then being denied?
JONES: There are two categories of insurers in Los Angeles. There are private insurers who are, in some cases, denying these claims because they are injecting a higher standard for determining whether, in fact, smoke damage has occurred. Then there's the FAIR Plan, which is the insurer of last resort. That's a private association of the private insurers. In about 2017 or 2018, the FAIR Plan submitted to the Department of Insurance changes to its fire insurance policy, requiring that there be permanent physical changes to the property, which is contrary to state law.
RASCOE: Well, if they're doing it and it's contrary to state law, how can they keep doing it?
JONES: Well, they're being sued. And the insurance commissioner issued a bulletin the other week that made clear that smoke damage is still a covered loss in California, that, in fact, insurers have a duty under California law to reasonably investigate smoke damage claims. The problem is that the department ultimately doesn't decide the claims, and so people are forced to resort to go to court to have these claims paid, which is outrageous.
RASCOE: You know, I also want to ask you about insurance rates in California. It was expected that insurance companies were going to ask for big rate increases after the LA wildfires. What's the latest on this?
JONES: So insurers have been asking and getting substantial rate increases since the 2018 Camp Fire, where they lost about $12 billion. State Farm, after the LA wildfires, filed for an emergency rate increase of 22% in California. That's been estimated to mean an additional $600, on average, per policyholder. And now we're waiting to see what the insurance commissioner will finally decide with regard to that rate increase.
But that gives you some idea of the magnitude of increases that we're going to see going forward in California, but not just in California, across the country where climate change catastrophes are landing. They're only going to get worse because we're not doing enough fast enough about global temperature rise, and so insurers are responding by raising rates and writing less insurance.
RASCOE: I mean, that gets to kind of the crux of the issue because the fear has been is that if insurance companies don't get increases, they can't make a profit and they will leave the state, or they will only insure the safest of bets. Is that a legitimate fear, like, right now? Because while climate change absolutely needs to be addressed, as you said, it's taking a very long time for states and governments to do that.
JONES: Well, it's even worse than that. At the federal level, we have an administration that's decided to not only abandon all efforts to address climate change but to go in the opposite direction and make it worse by doubling down on fossil fuel use. So that's a big problem, and I believe we're marching steadily towards an uninsurable future in this country, not just in California, not just in Florida, Louisiana, where the issues are most acute.
The highest rates, the greatest amount of deregulation, are not sufficient to enable national insurance companies to make money writing insurance in a geography where the hurricanes are getting more and more extreme, the loss is greater and greater, and it's predicted that it's only going to get worse 'cause we're not doing enough to address global temperature rise.
RASCOE: That's David E. Jones. He served as the insurance commissioner for California. He's currently the director of the Climate Risk Initiative at the UC Berkeley School of Law. Thank you so much for joining us.
JONES: Thanks, Ayesha. Transcript provided by NPR, Copyright NPR.
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