Officials confirm dropped policies

Resident Ganka Brown startled the City Council on Aug. 17 with a warning that insurance polices are being canceled, which she blamed on dead and overgrown vegetation, particularly eucalyptus trees.

Brown said she became aware of the cancellations because it happened to homeowners she knew.

"I know of two people who were told by their carriers they would no longer be insured, one of them specifically because of the eucalyptus trees bordering — not even on — his property," Brown said. "Eucalyptus don't serve any purpose in this town."

Brown said there are dead pine trees all over town, which also create a fire hazard.

"We are getting calls from a number of people every week," said John Campbell, an insurance broker in Laguna since 1973. "And it's not just one company. It's all over the board."

City Manager Ken Frank confirmed the cancellations.

"It's mainly Farmers [Insurance Group]," said John Moriko, owner of the only Allstate agency in Laguna. "We also re-underwrite, but we make recommendations to our clients and if they follow the recommendations or conform to the [California fire code], we do not cancel. Farmers sends you a letter saying you live in a forest — not even brush — and there is no appeal."

Insurance companies go through a process called re-underwriting. Properties that don't measure up to the company's risk guidelines could have their policies canceled.

In response to questions about the cancellations by Farmers, Jerry Davies, assistant vice president of media and public relations, North America, e-mailed a statement saying statewide eligibility guidelines were changed in 2009 for a small percentage of homes in areas with elevated wildfire risk, including Laguna Beach.

Davies said Wednesday by telephone that he would be unable to give an accurate count of renewals and cancellations in Laguna for at least another month because the company is still working on some policies.

"It was ultimately the individual homeowner's decision about whether or not to comply with adjusted guidelines," according to Farmers' e-mailed statement."

"Some policyholders decided to meet the adjusted guidelines and the policies were renewed after a physical inspection was performed to confirm that the homes satisfied the standards. Farmers continues to provide insurance coverage throughout California and continues to accept new homeowners' business in Laguna Beach, even in areas with elevated wildfire risk, given that these properties satisfy the established underwriting eligibility criteria."

"The main thing is to make sure all eaves are covered," Davies said. "There are a number of certified eave covers on the market."

Farmers' revised guidelines also included removing tree limbs from roofs and vegetation from gutters and clearing brush for 100 feet from structures to property lines, Davies said.

However, many properties in Laguna do not extend 100 feet beyond the structures, Moriko said.

State Farm's name was also raised in Frank's brief response to Brown's comments, but only in one instance that he knows of, Frank said Tuesday.

Laguna Beach State Farm agent Jim Lawlor said that his carrier grandfathered all existing policies after the 1993 fire until a change of ownership, regardless of location.

"There were no random cancellations and we have maintained that," Lawler said.

At the time, the insured homes were required to have a clear area of 300 feet on all sides, but that has changed, Lawler said.

"If a house is on a through street with access at either end, only 100 feet has to be clear," Lawler said. "If the home is on a dead end or a cul-de-sac, it must be clear for 1,000 feet on all sides."

Insurance companies use a riskometer to determine if a property is problematic. Riskometer shows the proximity of a home to brush and the density of brush from low to heavy, Campbell said.

"If the property is within the company guidelines they will insure it; if not, they will cancel the policy," Campbell said. "We had a client who had been with one company for years and they decided her home was too close to brush for their 'appetite,' insurance company lingo, so we found another company for her."

Moriko anticipates the time when homeowners' policies will be harder to come by, not just in Laguna, but nationally, and especially in California, due to the proliferation of specialty insurance companies.

"You never see an ad on TV for homeowners insurance — it's not profitable," Moriko said.

He believes companies that offer a variety of insurance are not going to let the specialty companies walk off with all the profitable policies, such as auto insurance.

"They will be saying if you don't ensure your car with us, we are not going to ensure you home or they will charge a premium," Moriko said.

Frank told the council that cancellations in Laguna have been going on for about a year and half. Campbell said it has been longer.

"Re-underwriting has been going on since I started in business here on Forest Avenue 35 years ago," Campbell said. "But when catastrophes happen, the carriers start to pay attention. After 3,000 homes burned in Oakland and the fires in Malibu and Laguna Beach, carriers would no longer write guaranteed replacement. As far as I know, no one writes it except one company and not in Los Angeles or Orange County."

The biggest problem is that homeowners are unaware of the replacement costs and they are underinsured, Campbell said.

"This came to light when we re-financed our home and found it would cost $350 a square foot to replace it," he said. "Replacement can go as high as $500, $600, $700 or $800 a square foot in some areas of Laguna. Homeowners need to have enough insurance to cover replacement. They can increase their deductible if they are unhappy with the cost."

Policy guidelines for companies differ, said Campbell, whose agency has contracts with about 100 carriers, not all of which write homeowner policies.

Of those that do, one company might require a property to be 1,200 to 1,250 feet from the brush; another company might insure property closer to brush if the value of the home makes the revenue from the policy worthwhile, he said.

"The thing about Laguna is that every property is essentially unique," Campbell said. "There are no homogeneous neighborhoods. You have an old house ready to collapse and next door is a million-dollar home."

If canceled, homeowners should ask their agent to contact the carrier to see if anything can be done to get reinstated, Campbell said.

He advises clients to clear brush near their homes, trim trees, especially those hanging over their homes, and pick up debris.

"I have never seen a policy canceled because of a diseased tree," Campbell said.

Moriko's agency offers a free service the homeowner can call if an insured home was threatened by a fire. If the service provider feels the home can be saved, it would be sprayed by a green, non-toxic fire-proof coating. The only caveat was that Moriko's company would not be responsible for the cleanup, which could be done with water.

"You cannot believe how many homeowners opted out," Moriko said. "If your house is saved why would you care if your patio furniture got dirty?"

The Laguna Beach Fire Department has launched the Ready! Set! Go! program to help homeowners in risky areas to protect the property and their lives. The program includes a free consultation.

To make an appointment, go to

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