{"id":5727,"date":"2018-06-25T12:09:25","date_gmt":"2018-06-25T17:09:25","guid":{"rendered":"http:\/\/blogs.law.columbia.edu\/climatechange\/?p=5727"},"modified":"2018-06-25T12:42:37","modified_gmt":"2018-06-25T17:42:37","slug":"wildfire-risk-in-a-warming-climate-homes-built-in-the-aftermath-of-wildfires-may-become-uninsurable","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2018\/06\/25\/wildfire-risk-in-a-warming-climate-homes-built-in-the-aftermath-of-wildfires-may-become-uninsurable\/","title":{"rendered":"Wildfire Risk in a Warming Climate: Homes Built in the Aftermath of Wildfires May Become Uninsurable"},"content":{"rendered":"
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by Jessica Wentz\"\"<\/a><\/em><\/strong><\/p>\n

On October 9, 2017, the Tubbs Fire ripped through Sonoma County, California, destroying nearly 5,000 homes and killing 22 people. It was the most destructive wildfire in California\u2019s history and the largest urban conflagration in the United States since the 1906 San Francisco earthquake fires. And it was only one of approximately 250 wildfires that sparked that same night in Northern California, causing a total of 44 fatalities and more than $9.4 billion in economic damages.<\/p>\n

Now, nine months later, the process of reconstruction has begun. Some of the first homes have gone up on burned lots. Many of these lots are located in the \u201cwildland-urban interface\u201d \u2013 rural, forested areas on the outskirts of cities that are much more prone to wildfires. Commenters have questioned the prudency of rebuilding in these areas in light of existing fire hazard and predictions of how the warming climate will fuel more frequent and severe wildfires in the western United States<\/a>.\u00a0 But there are social and economic factors which are driving reconstruction despite the risk \u2013 specifically, the emotional attachment of many property owners to the place they call \u201chome\u201d and the fact that property values in the areas remain extremely high (with some lots listed at over $1,000,000<\/a>).<\/p>\n

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\u00a0 \u00a0 \u00a0Construction begins on a house in Coffee Park (credit: Chad Surmick \/ Press Democrat)<\/em><\/figcaption><\/figure>\n

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The availability of insurance is a critical factor for rebuilding. But many areas prone to wildfire are becoming too risky to insure. As noted in a 2017 report from the California Department of Insurance<\/a>, premiums and wildfire surcharges have increased significantly in the wildland-urban interface, and several major insurers have stopped writing new policies and renewing plans in areas with high wildfire risk. As insurers begin to account for climate change in their wildfire risk models, they will likely become even less willing to issue and renew policies in these areas.<\/p>\n

At this time, insurance is still available to property owners who are rebuilding their homes in the aftermath of the fires. This may be due, in large part, to a California law which prohibits insurance companies from cancelling a policy while a primary residence is being reconstructed after a covered disaster, and requires them to renew the policy at least once following a total loss caused by a disaster (Cal. INS \u00a7 675.1<\/a>). The law provides short-term protection for property owners affected by the fires, but it does not guarantee that insurance will be available in the long run. Most homeowners\u2019 insurance policies are written for a term of only 12 months, and there are no laws in California which prohibit an insurer from refusing to renew a homeowner\u2019s policy<\/a> (apart from the one exception noted above). The bottom line is that thousands of homes may be reconstructed due to the short-term availability of insurance, only to become uninsurable in the near future.<\/p>\n

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When private insurance becomes unavailable, there is still a fall back option: a state-sponsored program called the California FAIR plan<\/a>. This program is already considered a \u201clast resort\u201d insurance option<\/a> due to high premiums and coverage limits. As more property owners in high risk areas enroll in the plan, state regulators will likely need to increase rates to reflect risk exposure and reduce coverage limits to keep the program actuarily sound (as required by Cal INS \u00a7 10100.2<\/a>). Ultimately, relying on the California FAIR plan as the primary insurer of homes in high risk areas may prove a losing proposition for the state \u2013 and recognizing this, the California Department of Insurance\u2019s 2017 report<\/a> outlines different legal approaches for maintaining private coverage in these areas, which include:<\/p>\n