Their Insurer Dropped Them, Then the LA Fires Burned Down Their Home

A few months before the Palisades fire burned their home to the ground, Sara and her husband Tom, not their real names, learned that their longtime insurer, State Farm, would be dropping their homeowners policy by the summer or fall of 2024.

The couple, who requested anonymity for fear of harassment, weren't the only ones facing non-renewals in their neighborhood, and by far not the only ones in the Golden State. State Farm, California's largest homeowner insurer, announced plans last year to cancel approximately 30,000 policies for homes, rental units, and other properties in the state.

In Pacific Palisades, which was ravaged by the recent wildfires, State Farm dropped 1,626 policies in July, California Department of Insurance spokesman Michael Soller told CBS MoneyWatch. The insurer didn't renew more than 2,000 policies in two other Los Angeles zip codes, including Brentwood, Calabasas, Hidden Hills and Monte Nido.

The announcement came only nine months after the insurer announced it would not accept new applications for homeowners policies in the state, citing growing costs and catastrophe exposure.

Newsweek contacted State Farm for comment by email on Friday, but received no response as of the time of this article's publication.

'We Had No Choice'

Once they were told State Farm wasn't going to renew their policy, Sara and Tom, both film producers and long-term Pacific Palisades residents, looked around for an alternative policy.

But it wasn't easy to find someone who'd accept them. Several major insurers have cut coverage in the most at-risk zones of the state in recent years, leaving residents with very limited options. According to a recent report by the California Department of Insurance, seven out of 12 of the biggest insurers in the state for market share have cut coverage since 2020.

"I individually called several insurers to see if they would pick up where State Farm left off, and nobody would accept us," Tom told Newsweek. "We had no choice, absolutely no choice," Sara added.

Like many other Golden State homeowners, got a policy with the California FAIR Plan, an insurer of last resort which offers fire insurance to those who can't find it in the traditional market.

As the name suggests, the FAIR Plan is supposed to be an option of last resort only: it's neither ideal nor advantageous for homeowners, as the coverage it offers is both expensive and narrow. But for many in the Golden State, it has become the only option.

In September 2024, the FAIR Plan counted 452,000 policies, up from roughly 203,000 four years ago, the Los Angeles Times reported.

"Our premium changing from State Farm to the FAIR Plan has gone from $3,000 a year for all-inclusive coverage to $12,000 a year for the FAIR Plan policy, which insures less," Tom said.

'So Much Devastation'

Then, some of the most brutal fires that Los Angeles County had ever seen broke out on January 7. The damages and economic loss caused by the blazes is estimated to be in the billions, and at least 25 people were killed.

"We've been through these things before and we knew about the bad wind conditions, but never in a million years would we have thought a fire that started in the Highlands would burn down our house," Sara told Newsweek.

"Our entire neighborhood is gone. There are a few homes across the road from us, but I've never seen so much devastation," she added.

The couple's home was completely destroyed, together with at least 12,000 other homes and structures damaged or burned down by the recent fires. As they were "living in a limbo" between friends' places and coping with the tragedy, Sara and Tom received an unexpected glimmer of hope.

A week after the start of the blazes, State Farm announced that it would after all offer renewals to Southern California residents who had been affected by the fires—as long as their policies had not been cancelled before January 7.

Unfortunately, the couple just had their policy canceled before the fires broke out. "I'm pretty sure that we were literally a month before the people that they just forgave, we were the last ones to get their policies canceled," Sara said. "It's just an injury on top of an injury."

"We paid more than 25 years in premiums on this house and then we were dumped," she said. "It's insane."

In a previous statement to Newsweek, a company's spokesperson had said: "Our number one priority right now is the safety of our customers, agents and employees impacted by the fires and assisting our customers in the midst of this tragedy."

The couple's home in Pacific Palisades was worth approximately $5 million. The FAIR Plan will only cover between half and three quarters of this sum—between $2 and $3 million. While Pacific Palisades is considered a relatively affluent neighborhood, many working class families in less wealthy areas, like Altadena, are in a very similar situation.

Rubbing salt in the wound, a call came for the couple after the fires from a State Farm agent who told them the company would be taking care of them, "don't worry about anything, we will take care of you," Sara reported.

But the phone call turned out to be an error: the agent thought the couple was still covered by State Farm. "It was a glimpse of the world we were in before they canceled us," Sara said. "It was like, here's a glimpse of what you could have had. I'm furious this was allowed to happen."

State Farm's decision to offer renewals to residents who were also going to have their policies canceled enrages Sara

"How does that help me? Where does that leave us? There's this little window where we got screwed," she said. "We literally fell through the cracks."