By Joe Brock and Chad Terhune
ALTADENA, Calif. (Reuters) – As Los Angeles construction worker Ivan De La Torre surveyed the rubble of fire-ravaged Altadena, the question that kept coming to him was: How would insurance companies cover the cost of rebuilding the entire area?
As hundreds of Los Angeles residents return to their homes left empty by the wildfires, many fear that their insurance may not cover the cost of rebuilding and that future payments will be astronomical.
“My concern is that the insurance companies will not be able to deal with all the claims and the bankruptcy file and that's it. It's scary,” said De La Torre, 32 years old, whose uncle and sister both lost their houses in the fire that burned. Half of Altadena, a suburb north of Los Angeles with a population of about 40,000.
Leo Frank III, a 66-year-old actor who lost his family home in Altadena, said he fears that insurers may drag their feet in paying claims and fail to cover the full cost of rebuilding.
“We're going to rebuild. Nobody's taking our house,” said Frank, as he hunted for a bathing suit for his 96-year-old mother in a parking lot full of donated items in Pasadena.
“But it would be a mess.”
Frank said he knows of other neighbors who lost their homeowner's insurance before the fire as insurers withdrew in California's dry, fire-prone areas.
“We're lucky we still have the policy,” he said.
The wildfires, among the worst natural disasters to ever hit California, killed 11 people and destroyed or severely damaged more than 10,000 structures.
Reuters contacted the top nine home insurance companies in California for comment.
State Farm, Nationwide, Allstate (NYSE:), Mercury, Liberty Mutual and Farmers responded with statements saying they are working with policy managers to help them process claims, without addressing specific concerns about residents not receiving adequate payments or future payment increases.
Following the fires this week, California Insurance Commissioner Ricardo Lara asked state regulators to suspend the process of not renewing and canceling insurance companies for one year.
Lara said in a statement Friday that next week he will hold insurance workshops in Santa Monica and Pasadena, the cities closest to the two major fires.
US insurance stocks slid on Friday as analysts estimated that insurance costs from the wildfires could top $20 billion. Private forecaster AccuWeather estimated damage and economic losses from the fires at $135 billion to $150 billion, reflecting the rising cost of homeowners insurance.
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Although Altadena has not experienced fire destruction on this scale in the past, the suburb sits at the foot of the San Gabriel Mountains, which are prone to burning. This has made getting fire insurance more difficult.
Many residents in Altadena, a racially and economically diverse suburb, are covered by the California FAIR Plan, a California state-sponsored insurance program used by property owners who cannot afford private market coverage.
FAIR Plan did not respond to a request for comment.
As private insurance declined or dropped homeowners in California's fire-prone areas, residents switched to the FAIR Plan, the data show.
From the end of September last year, 958 homes in Altadena were covered by the scheme, 28% from the year before, according to data from the insurance.
In Pacific Palisades, an affluent suburb west of downtown Los Angeles that has been ravaged by wildfires this week, the increased use of the FAIR plan has become even more apparent. There are 1,430 households under the scheme, up 85% from the previous year and that number will double by 2020, insurance data showed.
Gabby Reyes, whose home in Altadena was destroyed by fire Wednesday morning, said FAIR Plan workers were helpful but she was worried her policy might not be enough to cover the rebuilding of the house she shares with her mother and daughter, because of the fire. left only behind the foundations.
“They were talking to us, and they were good,” Reyes told Reuters, adding that property speculators called him asking if they could buy the land.
“You can't call people like that when they're destroyed.”