Cal Fire to Update Fire-Hazard Maps This Month.

Homeowners Insurance is Suddenly a Big Deal.

It wasn't too long ago that getting an insurance policy for your home was a simple as placing a 5 minute phone call to an insurance broker, or better yet, simply clicking a few fields on a website. It was one of the last things a home buyer did before closing escrow on a new home and was never more than just a “checkbox” item to complete.

But thanks to catastrophic wildfires that have destroyed so much California property over the past decade, those simple times are gone forever. The home insurance industry is in crisis, and homeowners across California are going to find it increasingly challenging to not only obtain home insurance, but to even keep the policies that they already have in place.

This is the first in a series of articles that I will be writing that highlight some very important issues that could have an negative impact on your current homeowner's insurance policy, or create hurdles for you to overcome if you are either buying or selling a property.

The Fire Zoning of California.

Cal Fire (formerly the California Department of Forestry) for years has been responsible for the creation and maintenance of the fire hazard severity zone (FHSZ) maps that overlay about one-third of all of the acreage in California. These maps simply classify each part of California as being in either a Very High, High, or Moderate FHSZ. Insurance companies use these maps, among other means, to decide if they are going to insure a particular property, and at what rate. If you're buying or selling a home, you can easily see what zone the property is in from the Natural Hazards Disclosure Statement (NHDS), which is a required document for the sale of any home or condo in California. It goes without saying that the more fire-prone the area, the more difficult it is to obtain insurance, and the higher the premiums will be.

With the current critical state of affairs in the insurance industry, homes that have High or Very High FHSZ ratings are experiencing sudden policy cancellations. It was reported that State Farm issued 1,600 non-renewal notices to homeowners in the Pacific Palisades neighborhood in the months leading up to the devastating wildfire that gutted that community. Even real estate transactions are falling apart at a much higher rate because of insurance concerns.

While these maps have been updated recently for rural areas under the jurisdiction of Cal Fire, the maps for land that falls under city or county jurisdiction haven't been updated since 2011.

But that is about to change.

New Maps to be Released.

According to this article in the Los Angeles Times, Cal Fire is rolling out an entire new set of maps in the coming weeks that will significantly increase the acreage currently under local jurisdiction to either Very High or High FHSZ:

• Approximately 247,000 acres statewide will be added to the Very High FHSZ.
• About 1.16M acres will be increased to High FHSZ

They will also add the third tier of Moderate rating for the first time. Cal Fire will release these maps in phases between now and early March. The map that covers the Bay Area will be released on February 24th.

What Does This Mean For You?

Since the updated Bay Area map has not been released yet, it's impossible to tell what the impact, if any, will be on San Carlos and surrounding communities, but I'll surprised if we come out of this unscathed. There are expansive neighborhoods throughout the hills of San Carlos that are currently not designated as High or Very High FHSZ that could be in the cross-hairs of this update.

If a property gets rezoned into a Very High FHSZ, the repercussions are not trivial for the homeowner. Not only does it increase the chances of having their policy outright canceled, but finding new insurance can result in dramatic increases in the premium costs — sometimes as much as four to five times their current policy. And that's if they can even find a legitimate insurance company to issue a policy.

It also means that homes in these regions may be subject to local “Fire Hardening” requirements that make the home more resistant to fire and mandate the creation of defensible space around the home. Indeed, recent changes to the law require homes in Very High zones to pass a fire hardening inspection by local fire authorities as a condition of selling the home. Unfortunately, we are finding that these inspections take a long time to schedule and the checklist to pass this inspection is quite extensive.

If you are a buyer or seller involved in a real estate transaction, you should definitely request an updated NHD report sometime after 2/24 to see if the fire zoning of that particular home has changed. I would be especially concerned with transactions that will be in escrow during that time but have not yet closed because a change like this could wreak serious havoc on the contract.

Let's hope it doesn't come to that.