Has Your Homeowners Insurance Been Cancelled? What California’s One-Year Moratorium on Homeowners Policy Non-Renewals Means for You

In 2019, Merlin Law Group’s California offices received calls almost daily from insureds who were “dropped” by their homeowners insurance company (i.e., non-renewed). The reason insurers are providing? Unsurprisingly: increasing risks of wildfires. In November 2019, Ricardo Lara, the California Insurance Commissioner, exercised his powers to place a one-year moratorium on cancelling insurance policies related to wildfire risk. Earlier in the month, Lara ordered the FAIR Plan—a quasi-governmental insurer-of-last-resort for people who can’t get insurance elsewhere—to sell the same kind of policies for which Californians once had no problem qualifying.¹

The Insurance Commissioner’s moratorium mostly covers zip codes in or adjacent to high risk brushfire areas, but he has also asked insurers to voluntarily stop cancellations elsewhere for at least one year as well. Experts are hopeful this approach will provide much-needed relief to policyholders, but insurance industry insiders are pointing the finger back at Lara and his predecessors for years of systemically lowering rates, contributing to insurers’ decisions to non-renew en masse.

The Insurance Commissioner also reported a six percent increase in insurer-initiated non-renewals in “high-risk” areas from 2017 to 2018, and an alarming ten percent increase among zip codes where fire damage actually occurred. These homeowners are finding they cannot secure the same level and quality of coverage they once did, or if they can, prices have increased dramatically. For those who cannot find any coverage on the standard market, there is the FAIR Plan, the use of which has increased 177% in these counties since the non-renewals began! California FAIR Plan limits homeowners dwelling coverage, meaning homeowners with high value properties need to look elsewhere, and usually at a significantly higher price.

The Insurance Commissioner’s notice may provide some peace of mind to policyholders who have yet to receive renewal or nonrenewal notices. Insurance Commissioner Lara requested the moratorium apply to all California admitted and non-admitted insurance companies writing residential and commercial property policies. This also applies to condo unit owners, mobile homeowners, and renters.

If you received a “Notice of Non-Renewal” from your insurer, scrutinize it to ensure compliance with the moratorium. If your policy non-renewed before the moratorium went into effect, you likely are without grounds to challenge the cancellation. However, non-renewals should always be scrutinized for defects. Non-renewal notices must meet strict criteria under the Insurance Code, and an insurer’s failure to comply with those requirements can render the non-renewal void. For example, insurers also must give notice of intent to non-renew six months in advance.

If your insurer non-renews your policy despite the moratorium going into effect, you should contact your insurance company and ask why.
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¹ The limits and coverages discussed in the linked blog post are now out-of-date with the Insurance Commissioners new requirement that FAIR Plan issue HO-3 policies and at higher coverage limits.