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California insurance commissioner orders key fixes for winery, vineyard, farm insurance policies after fire losses

California’s top insurance regulator on Tuesday announced two key steps intended to help many vintners, wine grape growers and other farmers that have been locked out of commercial insurance coverage after massive wildfires across the state in the past several years.

Speaking at a Southern California lemon orchard burned in the 2017 Thomas Fire, Insurance Commissioner Ricardo Lara ordered the California FAIR Plan, the state’s insurer of last resort, to increase 24-year-old coverage limits and doubled down on a pledge from this year to require insurers to price in mitigation measures that property owners already were taking to help prevent losses.

The move Tuesday follows the quick passing and signing this summer of Senate Bill 11, which unlocks the statutory shackles that have prevented the state’s insurer of last resort from writing fire policies for winery and vineyard buildings and infrastructure.

“While wildfires can happen in many agricultural regions of the state, some parts of our state have borne the brunt of devastating fires starting in 2017,” said Lara at a meeting with the California Farm Bureau Federation, according to a news release. “With a tighter insurance market due to wildfire risks, many farmers and vintners need more coverage than they can currently get. I am taking aggressive action to protect our farmers, vintners, and other businesses immediately while local government, state government, insurers and businesses all work together to reduce the wildfire risk and increase a competitive insurance market.”

Ryan Klobas, CEO of Napa County Farm Bureau, a key proponent of SB 11, called Lara’s announcement “good news.”

“Today is absolutely a step in the right direction,” Klobas told the Business Journal. “For ag overall, it means something will happen for the growing need for a competitive insurance market for wineries and vineyards.”

The Department of Insurance also released some shocking details of the data it ordered carriers for commercial insurance earlier this year to turn other about their claims and policies related to fires.

Large North Coast fires in 2017, 2019 and 2020 not only caused substantial losses in Sonoma, Lake and Napa counties but also were the bulk of the losses across the state those years, the agency reported.

“While the North Coast represents just 8% of the state’s commercial agricultural and farmowners insurance market, total incurred losses were 45% of the statewide total for those years,” the department said. “Wildfire losses also spiked in the Central Coast in 2017 due to the Thomas Fire and in Northern California in 2018, due to the Mendocino Complex, Carr and Camp Fires.”

California agricultural and winery insurance losses from fire in 2017-2020. On Oct. 11, 2021, the Department of Insurance said that although the North Coast accounted for just 8% of farm policies in 2017, 2019 and 2020, the region had 45% of the state's fire losses in those years. (California Department of Insurance)
California agricultural and winery insurance losses from fire in 2017-2020. On Oct. 11, 2021, the Department of Insurance said that although the North Coast accounted for just 8% of farm policies in 2017, 2019 and 2020, the region had 45% of the state's fire losses in those years. (California Department of Insurance)

The North Coast region also has the largest proportion (about 47%) of insured structures among the state’s wine-growing regions, according to the department. North Coast winery losses totaled nearly $371 million, or 91% of the losses among all of California’s wine regions.

Estimates for losses alone from last year’s Glass Fire, which cut across the heart of Napa Valley just as the county’s prime wine grape, cabernet sauvignon, was about to be harvested, were up to $2 billion. That blaze and others in Sonoma, Napa and Lake counties led to a 45% drop in harvested wine grape tonnage last year over smoke-damage concerns.

Here is the path of action Lara outlined Tuesday:

  • The FAIR Plan would amend its plan of operation within 30 days to increase its coverage limit for commercial property. That policy limit is $4.5 million, which has not been increased since at least 1997. The limit for the plan’s businessowner’s policy is $3.6 million, the same since at least 1994. The consumer price index nearly doubled during that time in California.
  • Department of Insurance staff would expedite review of the FAIR Plan’s agricultural filing, as required under SB 11. The filing came in Oct. 6.
  • A workshop would be held on new rules that will require insurance companies to incorporate communities’ and businesses’ fire-prevention actions when rating risk. That virtual workshop on the proposed regulations is set for Nov. 11 at 1 p.m.

“All these things we’ve always known, that vineyards act as fire breaks, are now starting to be taken seriously,” Klobas said.

Lara also called for a $20 million prescribed fire liability pilot project to cover liability for controlled burns, something that none of the carriers admitted to the California market currently cover, the department said.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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