California State Farm customers anxious as insurer starts major policy cuts. ‘There’s panic’

Debbie Lindh leaned forward in a chair on the front porch of her Grass Valley home and pointed at the house directly across a narrow street.

Lindh, 71, and her husband were recently told State Farm will no longer insure their property near the city’s downtown.

Yet the neighbor across the street is not losing coverage. Her insurer is also State Farm.

“It’s just so arbitrary,” said Lindh, who noted the many trees that surround both her home and that of her neighbor’s.

“This house versus that house? I just totally don’t get it.”

A little over a month after State Farm’s decision to drop roughly 30,000 home, rental and other property policies statewide, confusion and anger remain strong in Nevada County, one of the areas of the state deeply affected by the cuts. It is home to Grass Valley and Nevada City, both about 50 miles northeast of Sacramento and densely filled with trees.

State Farm said it is dropping policies across California for financial reasons and is ending coverage in areas with wildfire hazards, among other factors. A company spokesman declined to explain further how it decided which homes to drop.

It is just the latest major company to cut coverage in the state, which has seen its insurance market fall into turmoil. In recent years, insurers have stopped or restricted new business and dropped policies across California, blaming wildfire risk, state laws and inflation. That has left some homeowners with skyrocketing premiums and few options.

But State Farm’s announcement carries a greater weight than others. It has been the largest home insurer in California, and a major one in Nevada County. Many residents have been dropped by other companies, and forced to turn to the California FAIR Plan, the state-created private insurer of last resort. State Farm was seen as one of the community’s last hopes.

Until now.

While acknowledging they live in a dangerous fire area, people affected in the county feel a sense of unfairness about how the company decided to drop homes. In interviews and emails, more than 20 policyholders who are losing coverage there shared an array of emotions, which included anxiety, dismay and betrayal.

“I think I’m going through the seven stages of grief,” said Steven Dunlap, 64, adding that he was “mad as hell” about the company dropping his policy after 30 years.

Dunlap, who lives about five miles outside downtown Nevada City, said he had nine policies, including coverage on two rental properties, with State Farm and was hoping that the quantity of business would have insulated him from dropping his house.

He was visiting family when he got “the call” and said he told the company representative he spoke with that he planned to take that business elsewhere.

Even those who kept their insurance with the company are worried.

Reed Hamilton, 75, found out that State Farm will continue to cover his home, in a mix of woods and pasture land a few miles outside Grass Valley. Still, his policy price went up almost 80% last year. And there’s no guarantee his coverage won’t get dropped in the future. He has been in the house for 24 years, and the company has covered it the entire time.

“It’s a relief for now,” Hamilton said, “but it’s on my mind a lot about what we’ll do about it.”

Many residents are retirees, adding to the pain felt by the company’s decision. The county has one of the highest median ages of any in the state.

The area’s great appeal has become its great flaw; The waves of trees that provide its crisp air and sound of solitude have made it a place insurers increasingly don’t want to be. The higher prices people are paying have stretched their budgets and made them consider leaving the homes they planned to stay in for the rest of their lives.

Paying for expensive work to remove trees, clear other vegetation and modify their homes has made their properties more fire resistant, but it hasn’t prevented them from losing their insurance.

The county has 95 community groups, formed under the Firewise USA program, devoted to reducing wildfire risks — the most of any county in the country, according to a communications manager for the National Fire Protection Association, which oversees the program.

“We’ve invested at the home hardening level, at the community level and at the regional level,” said Nevada County Supervisor Heidi Hall. “And we’ve not seen any change from the insurance companies.”

State Farm insures Hall’s home and she is waiting to see if her coverage will also be dropped.

Like a good neighbor, State Farm is where?

In its March 20 notice, State Farm called the decision by its California subsidiary to cut policies “difficult but necessary.” In Nevada County, it is planning to drop more than 1,600 in three major zip codes alone — about 30% of the policies it holds in those areas.

Even State Farm agents did not come away unscathed. Mike Bratton, a well-known agent in the area, said the company is getting rid of the coverage on his Nevada City home. He is in his 39th year working for State Farm and has an office in Grass Valley. He declined to comment on the company’s decision to end coverage for so many homes in the area – including his own.

Residents now bristle at State Farm’s tagline, calling itself a good neighbor.

“They really need to change their motto, because it does not fit the actions they are taking in this area,” Lindh said. She and her husband have decided to insure their two vehicles with another company in response to having their homeowners policy dropped.

Kevin Cookson, CEO of Maven Insurance Services, in Grass Valley, directed blame at the Department of Insurance for State Farm’s action.

Raising rates in California can be a long process and insurance companies don’t always get the full increases they are looking for. While announcing its decision to cut policies, State Farm said it would continue to work with the department, and lawmakers, to create a situation in which “rates are better aligned with risk.”

Cookson’s home is also insured by State Farm. His coverage was recently renewed but he is waiting to hear if it will eventually be dropped. In the meantime, his business has received a large number of calls from people who are losing their policies.

“There’s panic,” he said.

The insurance department argues that it is trying to ease that panic. It is rolling out a series of rule changes this year that it hopes will stabilize the insurance market. One is meant to streamline how rate increases are approved in the state. Another is to allow companies to use computer programs that estimate wildfire losses when asking for those price hikes.

But it’s unclear what effect the changes will have on price and availability.

It’s also not clear what long-term effects State Farm’s decision will have on Nevada County. Some people who spoke to The Bee said they were considering leaving the state.

That is in line with a trend Mimi Simmons, a prominent area real estate agent, has noticed. She represents people selling their homes. In the last three years, a majority of her clients have left the state, she said, and rising insurance costs are contributing to that.

“The insurance has to be more affordable and have better coverage if California wants to keep people here,” Simmons said.

She was recently notified that State Farm will no longer cover her home.

But Simmons is not looking to flee the area. The fifth-generation Nevada County resident is right where she wants to be.

“There is nothing that will overcome my love of living in the mountains,” Simmons said.

A love of the outdoors is one of the reasons that Randall Frizzell, 75, keeps living near downtown Nevada City. State Farm is dropping coverage on the home, which he and his wife have lived in for 15 years.

They are looking for their fifth insurer.

Frizzell serves on the city’s Fire Safety Advisory Committee, which recommends wildfire mitigation work to the City Council. There’s an irony to his situation: Even someone who is trying to make the community more fire resistant got dropped.

On a recent afternoon, Frizzell sat on his front porch explaining why he loves the area. His father was born in Nevada County but later moved away and never came back. Frizzell, who grew up in Sacramento, is addicted to the surroundings. He takes daily walks, even in the rain and snow, and enthusiastically suggests hiking trails.

He also recognizes the “world class beauty” he has such easy access to has its drawbacks.

The couple has spent tens of thousands of dollars to make the home and property more fire safe, Frizzell said, including adding a new roof and windows.

He then walked around the property, showing areas where he regularly cleans pine needles off the ground and stumps where trees used to be. Frizzell, who worked for 47 years as an arborist, wanted to cut another down, he said, but didn’t have enough money to do so.

The decision by State Farm has left Frizzell wondering if they should have even bothered with all the work.

About 25 feet from his own house is another home. Its owners also have State Farm, Frizzell said, and are not losing their coverage.

“I’m glad my neighbors didn’t get dropped,” he said. “But why me?”

Frizzell sometimes wishes he stayed in Sacramento, where he could pay less for insurance.

Concerns about the future

Even with insurance options evaporating each year, Nevada County still has its gems that draw new people in and keep them there. There’s the Mill Street plaza, a pedestrian walkway in downtown Grass Valley lined with places to shop and eat. And downtown Nevada City, with its plaques noting its ties to the 1850s.

One of the area’s well-known attractions is Empire Mine State Historic Park, the former site of one of the state’s oldest and richest gold mines. Along with old mining buildings and shafts it has 14 miles of trails. On a recent afternoon, the sounds of birds chirping and flapping their wings was at times louder than the hum of vehicle engines. Visitor after visitor at the park had stories of insurance challenges involving companies other than State Farm.

Carson Ham, 50, was a lucky one. His home is covered by USAA, and the company had not said it would drop his policy. Yet he did not revel in his fortune. Wearing a wide-brimmed sun hat and shorts, he called on the Legislature to do more to protect homeowners.

Ham said he knows people who are losing coverage after decades with State Farm.

“To pull out on people who have been paying years and years is immoral,” he said, before heading towards a trail.

Outside City Hall on a recent evening, Nevada City’s Vice Mayor Gary Petersen said State Farm’s action did not quash the community’s motivation to reduce its fire risk.

In March, more than two-thirds of voters agreed to raise the city’s sales tax by .5% to fund wildfire prevention measures. He said the work is vital for the city’s safety, even if it doesn’t prevent people from being dropped.

At the same time, Petersen is a State Farm policyholder and his home’s coverage was recently renewed. While he awaits the possibility of losing his coverage next year, he worries what will happen to residents who weren’t so fortunate.

“I understand it’s a business proposition,” he said, “but at the same time we’re going to have people lose their homes over this.”