Northern California wineries, farmers vie for FAIR share of wildfire insurance coverage
Charlie Martin may have thought his wildfire troubles were eased once he reopened his Chalk Hill Ranch after the Kincade Fire of 2019 took out non-essential buildings and scorched the land.
But two years later, he’s having to deal with serious insurance issues for his 300-acre Chalk Hill Ranch outside Healdsburg and wants his fair share. Martin has seen three policies whittle down to one that only provides $400,000 in coverage to the ranch manager’s house. Anything beyond that, including his wine and horse boarding operations valued at $3 million, was denied coverage because of the fire risk given his location.
Tubbs, Kincade, Nuns and Glass — Sonoma County is home to some of the worst wildfires in the state within the last four years. The rest of the North Bay and the state, for that matter, aren’t faring much better. More than 4 million acres burned in California in the last year alone, Cal Fire reported. Double that number, and you have the acreage scorched in just a three-year period starting in 2017. In that period ending last year, Californians endured 45,726 structures burned and 183 fatalities.
With an unprecedented drought and already about 6,500 more acres consumed by fire in the first six months, indicators show this year could be worse.
“I’m holding my breath,” Martin said. “And I’ve been 45 years with the same insurance company. I’ve canvassed every insurance company I could think of.”
When choices ran out for Martin, he turned to the California Fair Plan, which is billed as the state-sponsored plan of last resort. It also comes at a higher price. Then, there’s another catch. Existing statutes governing the FAIR plan prevents it from covering agricultural property.
California Senate Bill 11, which the Assembly joined the Senate in passing last week, seeks to throw out the exemptions, at least on buildings and inventory or stock. The bill, authored by Sen. Susan Rubio, D-Baldwin Park, has headed back to the Senate because of an amendment. If it’s fast-tracked as planned, Gov. Gavin Newsom is expected to sign it in the next few weeks.
Still, the battle isn’t over. Once implemented, it may take months for insurance companies to adapt to the legal change. But time is a luxury ranchers don’t have when they’re staring down the barrel of a firestorm threat.
Like wildfires, issue crosses Sonoma County boundaries
“The castle isn’t covered,” V Sattui Winery General Manager Tom Davis said of the family’s Castello di Amorosa in St. Helena, a prime labor of love to Dario V Sattui. “The bill doesn’t help this year, and it doesn’t go far enough. It maxes out at $3 million. For the agriculture industry that has had insurance canceled, that’s just a fraction of what a lot of people need. Some houses go over $3 million, much less a winery.”
V Sattui Winery got coverage, but it came at a steep price.
“We’re paying four times what we paid last year,” Davis said.
Castello di Amorosa was damaged during last year’s Glass Fire that roared through Solano County before invading the winery-rich Napa Valley, then up and over Hood Mountain into Sonoma County. The fire that started on Sept. 27 caused $2.9 billion in insurance losses, according to the Insurance Information Institute.
Rising wildfire coverage aligns with the costs of losses, prompting some insurance stakeholders to ponder whether the industry can sustain its viability at the current pace of the threat.
According to PropertyCasualty360.com — an insurance data research firm for brokers, the upward slant of the escalating costs of claims looks like a cliff.
Between 1960 and 1980, the aggregated average of California’s fire insurance claims cost $100 million per year. In the decade starting in 2000, the claims climbed by six times that number. In 2019, that figure rose to more than $4 billion, while last year the industry reported these claims as topping $9 billion.
An accelerating freight train out of control
“This is a true crisis out there. The FAIR plan is critical and a step in the right direction, but it doesn’t go far enough,” said John O’Neill, senior managing director in the Risk Strategies Company’s San Francisco office.
O’Neill cited one client of his brokerage firm as paying more than $120,000 a year to insure a $1.2 million building. Some wildfire deductibles equate to half the value of the coverage.
“I’ve worked in this industry for 30 years and have never seen a more difficult time,” he said. “This is not sustainable.”
His hat is off to State Farm, which is insuring in ZIP codes denied by other carriers. But how long can insurance carriers like State Farm shoulder the burden before the system breaks, O’Neill questioned.