The Palisades Fires are considered among the worst in history, with billions of dollars in damage in the hills of Los Angeles. Lost in politics and the damage is the fact that many of these houses were underinsured and cost several million dollars. In the aftermath, many people faced delays in receiving payouts or outright denials as insurance companies scrambled to cover the damage.
“The council shared a list of 11,125 residential parcels in the city of Los Angeles that were inspected by the Los Angeles Department of Building and Safety after the wildfires,” the company said. “Redfin was able to match nearly 11,000 of those parcels with Redfin property value estimates as of December 2024—the month before the fires. Many, but not all, were completely destroyed by the fires.”(1)
While the homeowners were dealing with the insurance companies, they had to live in temporary housing that they had to pay for. Over a year later, many are still in temporary housing while they work out how to rebuild their lives, some of them having lost everything in the fires. With the state's living costs among the highest in the country, some of the victims have decided it wasn’t worth staying and have moved out of state.
While the damage was considerable, state regulations, both in building rules and insurance, have compounded the problems the people face. Insurance giants such as State Farm and Allstate have begun to pull out due to stat rules covering insurance losses. In addition, some of the areas originally zoned for single-family housing were no longer going to be zoned for such housing, forcing families to seek and obtain a temporary injunction to keep their land for single-family homes.
In the months leading to the fires, California faced an insurance crisis as many insurers withdrew for several reasons. Chief among them was the increasing amounts of damage caused by wildfires and floods that have plagued the state with climate change. In the case of the Palisades Fire, the mansions that were burned down were worth a lot more than most insurance companies were willing to pay and have been in legal fights with homeowners over their payments. Only when Los Angeles County executives threatened to get involved did they start sending out the checks.(2)
The reason insurance companies have started to non-renew their clients is two-fold. One is the fact the disasters in California have been increasing in size and destruction. In addition to the wildfires that regularly devastate the state, landslides caused by flooding during the rainy season, blizzards in the mountains, and the potential for earthquakes have made them very hesitant to continue covering California clients. State Farm, to name one example, pulled out, non-renewing their clients. In a statement, the company explained that the decision was driven by several factors, including "historic increases in construction costs outpacing inflation rapidly growing catastrophe exposure, and a challenging reinsurance market.” With such high levels of exposure to natural disasters like wildfires, insurers have found it increasingly difficult to provide affordable coverage in high-risk areas.(3)
This is compounded by California’s FAIR Plan, one of the state’s governments backed insurance plans. Established in 1968, the FAIR Plan, or Fair Access to Insurance Requirements, is essentially a last resort insurance plan for homes and buildings affected by wildfires. Unfortunately, they only provide the basic and necessary coverage as required by California law. They aren’t going to cover the damages to the multi million dollar homes that were affected by these fires, this is more for those who got priced out by the insurance giants and aren’t willing to put in more specialized coverages.(4)
This is not the only state facing insurance issues, as states like Florida and Texas, which have faced hurricanes and floods, have faced an insurance lapse or even completely pulled out. California has been the most visible and focused because of the wildfires, and in the case of the Palisades Fire, very destructive fires, as the properties were worth millions, and their owners were forced to leave the state.
California faces an increasing crisis concerning the insurance market. The Palisades Fire was probably the most visible of these fires, and the damage continues to mount as families struggle to put the pieces together. Government regulations and insurance denials make it harder for them to even get their money back. This fire will continue to haunt many involved for years to come.