California Homeowners Denied Home Insurance: 'We Are Losing Everything'

A family with two children has been denied homeowners insurance for their $6 million home, and now they fear what will happen as they lose more money trying to fix the house.

Frank and Neda Raymond are holding their breath hoping their home insurances, Selective and Ategrity, will fix the leaks and damage in their $6 million Pacific Palisades home in California.

"The home has faulty waterproofing which is causing water to penetrate the house," Frank told Newsweek. "They are claiming they are not responsible for damage to the property even though they were informed of the leak but refused to cover repairs."

Frank, 55, built the home four years ago, but after the insurance companies refused to cover its repairs, the Raymonds fear they could lose everything.

"We are losing everything as a result with carrying costs, and they won't even give us the money to repair the damage," Nedah, 50, told Newsweek. "It's very sad. We are a couple with two small children losing everything."

In the summer of 2022, the insurance said they were "not responsible" because they no longer insured the house. At the time the house was built, they were the insurer, causing the family significant financial stress, the Raymonds said.

The Raymonds filed a lawsuit against the contractor, but the trial isn't set until September 2025, which will be far too late for the financial losses the family expects to endure.

The 5,300-square-foot, five-bedroom home went into escrow before a buyer pulled out due to additional and worsened leaks, Nedah said. This caused mold and even more financial strain for the Raymonds, who say another neighbor renting a home from the same builder is having the same leak problem as well.

"I think in some way this is typical behavior of an insurance company," Frank said. "They don't want to pay claims. They deny claims, drag it out and make it very difficult."

Frank, a small-time developer, built the house as his first development project from the ground up. He planned to sell the home, but as they've seen the past few years, the general contractor failed to provide sufficient waterproofing.

"In the beginning, it was like a game of whack a mole injecting resin into the walls and then shortly after a leak would reappear somewhere else," Nedah said. "This went on and off for a couple of years until finally during the time we had thought that the leaks had stopped."

That was when they listed the home on the market, but the buyer pulled out when the leaks started again.

"Frank has put almost all of his money into this project and all these insurance companies need to do is honor the project and pay the claims but instead we would schedule mediation with them and the last minute they would cancel," Nedah said, adding that they had already paid for some of the mediations.

Since then, the insurance companies have offered $150,000, which Nedah said is a fraction of what is owed minus the carrying costs and opportunity loss.

"They are playing a terrible insurance game," Nedah said. "A beautiful $6 million (home) just sitting vacant full of leaks wasting away."

As the parents of two children, the Raymonds fear for their financial futures, unsure of what's next if the insurance companies continue to refuse coverage.

"I never would wish this on anybody. Insurance companies get paid many thousands of dollars, yet somehow, just because they can, deny they do," Nedah said. "Just refusing to do the right thing, it's just shameful. My hair has fallen out in the last couple years because of the stress of this."

Newsweek reached out to Selective and Ategrity for comment via email.

Statewide Problem?

While the Raymonds look for answers, they aren't the only ones experiencing strife after a number of home insurers ended coverage in California.

Marisa Simonetti, the owner of Minnesota-based Simonetti Real Estate, said several home insurance companies have left the state. While Allstate is still accepting new auto customers and is renewing existing homeowners coverage, it paused all new home insurance policies in California.

"I'd consider this a major red flag for the state overall," Simonetti told Newsweek. "It seems like the insurance companies know something the rest of us don't."

The state has faced ongoing wildfires, which naturally saw home insurance prices hiked. But across the board, homeowners have seen surging costs due to an uptick in housing sales prices and more expensive building materials and labor.

Simonetti said it's rare for insurance to be denied over leak and drainage issues, but it's possible previous claims or some other reason made the homeowners appear risky to cover.

"I believe this is a clear case of negligence by the homeowner insurance companies. A leak and drainage issue in a $6 million home is not something that should be taken lightly or ignored by these companies," Jonathan Faccone, the founder of HALO Homebuyers, told Newsweek.

He added that failing to do a proper inspection and evaluation of the property could have led to the current situation with the Raymonds needing coverage they don't have.

Due to this, the Raymonds face a financial burden that all homeowners likely wish to avoid.

The exact reasons for home insurance coverage denial will vary, but according to Terry Fisher, the group chief marketing officer of We Buy Any Home, insufficient maintenance and high property value can make insurers reluctant.

"The perceived risk associated with high-value properties, like a $6 million home in California, may lead insurers to scrutinize such cases more closely," Fisher told Newsweek. "Transparency during the application process is key, and non-disclosure of relevant information may result in denial."

Experts say homeowners in the Raymonds' shoes will either have to absorb the cost themselves, look for other coverage or sell the house entirely.

"Homeowners who can't qualify for their own policy will have the lien holder force a policy onto the property," Simonetti said. "This is typically very costly."

Update 02/08/24 5:57 p.m. ET: This article was updated with comment from Faccone.

Are you a California homeowner who lost their homeowners insurance? Newsweek wants to hear from you. Contact us at personalfinance@newsweek.com.