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Calif. Bans Insurance Companies Dropping Customers In Wildfire-Prone Areas

SACRAMENTO (CBSLA/AP) — California regulators Thursday issued a one-year moratorium which bans insurance companies from dropping customers who live in or near wildfire disaster areas.

Firefighters battle the Getty Fire in houses on fire in Brentwood, California on October 28, 2019. - A wildfire broke out early Monday near the renowned Getty Center in Los Angeles, forcing widespread evacuations as the flames destroyed several homes in hillside communities. The so-called Getty Fire broke out overnight near a major freeway and quickly spread south and west, scorching 500 acres (202 hectares) and sending people fleeing in the dark. (Photo by Apu Gomes / AFP) / The erroneous mention[s] appearing in the metadata of this photo by Apu Gomes has been modified in AFP systems in the following manner: [Getty Fire] instead of (Tick Fire]. Please immediately remove the erroneous mention[s] from all your online services and delete it (them) from your servers. If you have been authorized by AFP to distribute it (them) to third parties, please ensure that the same actions are carried out by them. Failure to promptly comply with these instructions will entail liability on your part for any continued or post notification usage. Therefore we thank you very much for all your attention and prompt action. We are sorry for the inconvenience this notification may cause and remain at your disposal for any further information you may require. (Photo by APU GOMES/AFP via Getty Images)

State Insurance Commissioner Ricardo Lara announced that the moratorium prevents insurance companies from not renewing policies for about 800,000 homeowners who live either inside or next to the perimeter of one of 16 wildfires that burned across the state in October.

It's the first time such a moratorium has ever been issued.

California law already prevents insurances companies from not renewing policies for owners whose homes were completely destroyed in a fire. However, this moratorium specifically protects homeowners who did not suffer a total loss.

"I am calling on insurance companies to push the pause button on issuing non-renewals for one year to give breathing room to communities and homeowners while they adapt and mitigate risks, give the Legislature time to work on additional lasting solutions, and allow California's insurance market to stabilize," Lara said in a statement.

The moratorium is the result of state Senate Bill 824, also known as the Wildfire Safety and Recovery Act, which took effect in January. It prevents insurance companies from canceling or refusing to renew a policy for one year after a state emergency is declared for a home that is located in an area where a wildfire occurred.

RELATED: 'Act Of God': Tree Branch Blown Onto Power Lines Caused Getty Fire, LA Mayor Says

The order from Lara comes as the insurance industry struggles to adapt to a series of record-breaking hurricanes and wildfires that have cost the U.S. $500 billion to clean up over the past five years.

Destructive wildfires in 2017 meant California insurers paid more than $2 for every $1 they collected in premiums. In 2017, they paid $1.70 for every $1 in premiums, according to state officials.

"Year-over-year losses that the industry has seen are not sustainable for companies or good for homeowners," said Rex Frazier, president of the Personal Insurance Federation of California.

Seven of the 10 most destructive wildfires in California history have happened in the last five years, including 2018's Camp Fire, which destroyed roughly 19,000 buildings and killed 85 people in and around the Northern California town of Paradise. That blaze alone generated more than $12 billion in insurance claims, according to the Department of Insurance.

The Thomas Fire, the second largest in state history, broke out in December 2017 and scorched 281,000 acres and destroyed more than 750 homes in Ventura and Santa Barbara counties. It set the stage for the deadly mudslides which hit the Santa Barbara County enclave of Montecito in January of 2018, when a storm triggered flash floods on hillsides ravaged by the Thomas Fire, killing at least 21 people, destroyed or damaged hundreds of homes, and shutting down the 101 Freeway for weeks.

In November of 2018, the 97,000-acre Woolsey Fire broke out south of Simi Valley. It then jumped the south side of the 101 Freeway near Calabasas and spread into Malibu. The fire destroyed more than 1,500 structures and was responsible for three deaths.

Since 2015, state officials say insurance companies have declined to renew nearly 350,000 policies in areas at high risk for wildfires. That data does not include information on how many people were able to find coverage elsewhere or at what price.

Some homeowners have been forced to purchase insurance through the California Fair Access to Insurance Requirements Plan, an insurance pool mandated by state law that is required to sell policies to people who can't buy them through no fault of their own.

(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)

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