Up to $150bn damage in LA fires unleashes wave of anger at cancelled insurance

When Janet Mendell and her husband, Dennis, both aged 84, bought their property in the Pacific Palisades in 1972, it was a solidly middle-class neighbourhood.

It was not known for the celebrities and actors, who she says later decided it was a “heavenly place to live” and who have, in her opinion, received outside attention from the media following the disastrous wildfires that have razed more than 10,000 buildings and homes to the ground across Los Angeles.

“My husband was an attorney and I was a first-grade school teacher,” she told The i Paper, speaking from the home of one of her three daughters after they were evacuated along with around 180,000 people after dramatic wildfires raged this week.  

She says there have been wildfires before, recalling one that struck in October 1978, destroying more than a dozen houses and a church in the neighbourhood.

“There were the Santa Ana winds, but nothing like the winds we have now,” she said.

Janet and Dennis still do not know the fate of their home, although she is not optimistic it has been saved. She is scolding herself for not getting ready the valuables and photographs they would have taken with them when they left.

“We were kind of numb because I have watched so many fires all around us. And you turn on the news and you just stay, standing there and watching the fire,” she said.

“And that’s not what you’re supposed to be doing. You’re supposed to be getting into fight or flight mode.”

Los Angeles county Sheriff Robert Luna described the damage as looking like an “atomic bomb dropped on these areas” as residents returned home to find their homes turned to ash.

Janet said the only tears she has shed so far are over the Palisades “village”, where she had raised her family, a place filled with small businesses such as the yoga studio she once attended, had been “wiped out”.

While firefighters are still battling to bring the blazes under control, others are coming to terms with the scale of the disaster.

The fires could cost an estimated $135bn to $150bn (£109bn-£121bn) in damage and economic loss, according to private forecaster AccuWeather.

It has also emerged that many of the properties destroyed did not have fire insurance following a trend for private insurers to drop policies in areas with the most risk.

In Pacific Palisades for example, where the largest fire has raged, consuming more than 13,750 hectares or 53 square miles – around 1600 policies were dropped by insurer State Farm in July, according to US media outlets.

It also dropped more than 2,000 policies in other Los Angeles neighbourhoods – reflecting a broader trend among private insurers, CBS San Francisco reported.

State Farm said in a statement “our hearts go out to the people and communities experiencing the danger and loss from these fires, as well as the firefighters, first responders, and volunteers who are working tirelessly to contain the fires”.

However, it has been subject to a wave of anger from consumers after the company cancelled the policies last March.

The actor James Wood, who lives in the Pacific Palisades, wrote on social media that “one of the major insurances companies cancelled all the policies in our neighbourhood about four months ago”.

Actor Rob Schneider criticised State Farm on X, saying: “Screw you and all your phoney [sic] commercials!! You are a pile of crap for canceling insurance policies of Californians! I will never use State Farm insurance ever again!”

State Farm’s president Denise Hardin, claimed in a letter to state regulators at the time it had no alternative but to cancel the policies.

“We must now take action to reduce our overall exposure to be more commensurate with the capital on hand to cover such exposure, as most insurers in California have already done,” she said. “We have been reluctant to take this step, recognising how difficult it will be for impacted policyholders.”

Those who are unable to take out private insurance were able to sign up to a government programme, but that only covered $3m for residential properties – or left without insurance altogether.

The episode was similar to the plight of residents in places such as Florida and Louisiana, where an increase in natural disasters has caused premiums to spike.

In hurricane-prone areas of Louisiana and Florida, insurance prices more than doubled after hurricanes in 2020, 2021 and 2022 threw state markets into turmoil, Reuters reported.

Galina Hale, a professor of economics at the University of California Santa Cruz, told The i Paper that “natural disasters have always been an economic story”.

She says insurance companies use models to determine what is termed “actuarily fair” insurance policy pricing.

“They might charge a mark-up over it, but with higher frequency and severity of floods and fires, the loss risks have gone up substantially,” she said.

“Some areas have such high risks that insurance companies would have to charge insurance premia above what people might be willing to pay. These areas then lose insurance coverage altogether. In other areas, insurance companies have to increase their premia to reflect rising risks.”

Changing climate brings year-round fire season to California

Dr Kimberley Simpson, of the University of Sheffield’s School of Biosciences, in the UK, says the fires have been made especially devastating as a result of a drought that has lasted eight months, and the so-called Santa Ana winds that normally hit the area in December. They can reach speeds of 100mph.

She has studied the way the California fire season has changed and said fires are now happening outside of the traditional season.

“In the western US, wildfire season typically happens in the summer and fall, when hot temperatures and low rainfall dry out plants, making them more likely to ignite and spread fire,” she says.

“Wildfires are now becoming more common outside of the usual fire season, like the ones currently burning in southern California.”

She says research shows climate change is creating warmer conditions that dry out vegetation even further.

And she warns there is no real way of reversing what has happened.

“There is no simple solution for these extreme wildfire events, but the adoption of strategies such as improved forestry management and careful planning and building policies, will enhance the resilience of communities to wildfire risk,” she says.

For Kyle Kertscher, a divisional commander with the Fortuna Volunteer Fire Department, located about 650 north of Los Angeles, and not far from the Oregon border, the changing climate means the fire season is no longer confined to a certain time of year.

Under a California state policy, this week he dispatched members of his team to help tackle the half-dozen blazes threatening the city of four million people.

“We’re happy to provide that [help] because we might need it someday from those folks in our area, and we often do,” he said.

The 35-year-old told The i Paper the traditional fire “season” would run from driest months of May and June, into late October or November. However, they are now on high alert all year round.

“Now we’re just ever ready,” Kertscher said. “We used to have a defined fire season. Now we could be fighting fires in the middle of January, and it’s become unpredictable.”