Apr 27, 2022

California farmers still losing coverage as insurance issues persist

Terry Rudkin farms avocados in the Ventura County town of Bardsdale, across the Santa Clara River from Fillmore, on a ranch his family has owned since 1912. In December 2017, he watched from his deck as the Thomas Fire burned in the mountains several miles to the north.

“It was never anywhere near us,” he said. “There was never any danger at all. We didn’t even have smoke from it.”

Then, one day late last year, his insurance carrier of 31 years informed him it would not be renewing his coverage.

“The explanation was that my ranch and residence, and my rental home, were being non-renewed because we were in a wildfire zone,” Rudkin said. He disputes that assertion vigorously.

“We are located in the flatlands of the Santa Clara Valley,” he said. “We don’t have any exposure at all to hillsides on three compass sides of our property. I was shocked.”

Fellow Bardsdale farmer Marjie Bartels tells a similar story. Her longtime carrier sent her a letter in mid-September advising that her policy, due to expire Dec. 11, would not be renewed.

Quoting from the letter, she said the insurer told her that coverage was being dropped on account of “having buildings located within ineligible wildfire exposure areas as determined by the risk model we use to assess risk damage or destruction as a result of wildfire.”

That left Bartels, who grows organic Valencia oranges, less than three months to find new coverage.

“Operating a farm or ranch without insurance is unwise at best, and dangerous at worst,” she said, citing the need to protect against natural and man-made disasters. “Most of the small farmers I know would not be able to recover from these types of events without insurance.”

Rudkin and Bartels said their former insurers did not visit their farms before declining to renew their policies.

Michael Soller, a spokesman for the California Department of Insurance, said companies can fail to renew policies for a variety of reasons. He said different zip code areas are evaluated for “both lower-risk and higher-risk areas.”

The California Department of Insurance is currently conducting a survey of policyholders and proposes regulations in hopes of helping property owners deal with the problem.

Soller said the survey is intended “to identify what geographic areas are most impacted by the wildfire-related coverage eligibility, restrictions, policy limits and nonrenewals.” He said the findings will guide efforts “to address those impacts through policy solutions.”

Peter Ansel, a California Farm Bureau policy advocate who handles wildfire issues, said the proposed regulations have two objectives: creating discounts for property owners who carry out home-level treatments to mitigate fire risk, and creating community-level designations for fire preparedness as a result of local, state and federal investments.

The regulations are meant to see that California homeowners—rural and otherwise—aren’t socked with discriminatory rates and to encourage a healthy, competitive insurance market.

“They’re stating that insurers will have to consider community-level fire-safe designations as part of base rate plan setting,” Ansel said. “Should the rules go into effect as they’re written, that would afford people the best opportunity to see discounts or to force the insurers to consider what communities have done to be able to decrease risk.”

The California Farm Bureau and the California Forestry Association submitted joint public comments on the proposal, arguing that the regulations don’t do enough to ensure that rural residents won’t face nonrenewals and steep rate hikes.

Farm Bureau and Calforests also argued that the state’s rules should account for federal investment in wildfire mitigation and forest resilience projects. Two such projects in California, the Stanislaus Landscape Project and the North Yuba Landscape Project, were announced earlier in April.

The two groups argued that the communities that stand to benefit from the federally funded mitigation work are likely to be smaller rural areas or individual farms and homesteads that can easily be overlooked for community-designation purposes.

Last year, California Farm Bureau and Insurance Commissioner Ricardo Lara held several roundtable meetings with Farm Bureau members and staffers around the state, at which farmers related their struggles to secure insurance in the wake of devastating wildfires.

One result was the signing last summer of Senate Bill 11, which added farm structures to the list of commercial properties that could be covered under the California FAIR Plan. FAIR, which stands for Fair Access to Insurance Requirements, is the state’s insurer of last resort. Before the bill was signed, a farmer could insure only a residence under the plan.

At Lara’s direction, last fall, the FAIR Plan’s limits for commercial properties were raised from $4.5 million to $8.4 million. The business-owner limit was raised from $3.6 million to $7.2 million.

Losing his insurance very nearly forced Rudkin out of farming.

“I actually made the decision, since I’m a small grower, that if I couldn’t get insurance on my home … that I would have no alternative but to take the drastic step of taking down my orchard,” he said. “In fact, I actually contacted some people about doing that, because the only alternative insurance I could get … was if I was a nonagricultural operation, which meant I couldn’t have any orchard on which my structures are situated.”

Rudkin said his broker told him he wasn’t hopeful but would see what he could do. Meanwhile, Rudkin called several companies himself.

“They immediately said, well, what’s your zip code?” Rudkin said. Upon hearing the answer, he added, they told him: “I’m sorry, we can’t write insurance for you. You’re in a wildfire zone.”

He looked at the FAIR Plan, calling it “a good effort to try to help give growers and farmers a relief, to give them some bottom to their fire-insurance needs.” However, in his case, he decided “the FAIR Plan wouldn’t give me the kind of coverage that I need for the structures I’ve got.”

Finally, in early April, a new insurance company paid his farm a visit and wrote a policy. While it offers the same coverage as his old insurance, the price has doubled, he said.

“That has been the consequence that most of my neighbors have faced, who have gotten insurance,” Rudkin said.

Rudkin said he’d like to see the Department of Insurance look into the wholesale cancellation of insurance by zip code that he believes is happening.

“If they have a wildfire exposure model, I haven’t been able to find it on the internet,” Rudkin said. “I’d like to see it, and I’d like to know what is the criteria for applying the wildfire exposure to the geographic area that’s in that zip code.”

– Kevin Hecteman, California Farm Bureau Federation