Mike Doyle January 24, 2025
It’s every landlord’s worst nightmare: a fire leaving your home in cinders without having the insurance to cover the loss. That’s the issue facing many homeowners and landlords whose properties were devastated by the LA wildfires.
Although the fires are making headlines for decimating celebrity homes, they have also destroyed apartment buildings, Airbnbs, hotels, and trailer parks. Estimates of the economic damage from the fires are now reaching $52 billion to $57 billion, and with the fires still raging, that number will only increase. However, insurance companies saw the writing on the wall and started fleeing just months before disaster struck.
According to CBS MoneyWatch, State Farm dropped 1,600 policies in Pacific Palisades in July, California Department of Insurance spokesman Michael Soller said in an email. An analysis of insurance data by CBS San Francisco last year found that State Farm also dropped more than 2,000 policies in two other Los Angeles ZIP codes, which include the Brentwood, Calabasas, Hidden Hills, and Monte Nido neighborhoods.
State Farm has followed in the footsteps of other private insurers, including Allstate and Farmers Insurance, dropping California policies or stopping underwriting. This has left property owners with two stark choices:
For landlords, the FAIR plan is essential but costly because of the high risk. It’s also a shared market plan, which means it is state-run but financially supported by several private insurance companies.
However, it’s fairly limited compared to a standard private insurance policy. Liability, medical payments, or loss of coverage insurance might not be covered—only dwelling and personal property. For landlords, that’s a big issue.
Also, FAIR plans usually only cover a home at cash value, not replacement cost value. With increased construction costs, material, and labor shortages (sure to be exacerbated if Trump’s deportation plan goes into effect), and demand for contractors, especially in LA, cash value coverage is not likely to come close to replacing a property. For many landlords, this is likely their only insurance, and navigating it to cover damage could be difficult and disappointing.
There is some good news for landlords who have home insurance: California has banned insurance policy cancellations until 2026.
The Los Angeles County Consumer & Business Affairs website was recently updated to provide invaluable information, mostly for tenants, in the wake of the LA wildfires. This information can also be useful for landlords when referring tenants or knowing what rights tenants have and what a landlord’s responsibility is. For further information, landlords should call (800) 593-8222 or email [email protected].
Far more useful for landlords is the California Apartment Association (CAA) website, which addresses the legal obligations of rental property owners in the wake of the fires. Topics covered include:
The bad news for landlords with properties destroyed by fire—as if they needed any more bad news—is that they are still on the hook for the mortgage. The good news is that their mortgage servicer will have an assistance program to help—usually a 12-month forbearance or loan modification. Calling your mortgage company or its servicer after a natural disaster is crucial.
If you don’t know your servicer, try using:
Other resources for property owners affected by a natural disaster:
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