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Bay Area residents could face more challenges from skittish insurance companies

Livermore resident loses homeowner's insurance after flooding from plumbing problem
Livermore resident loses homeowner's insurance after flooding from plumbing problem 05:11

LIVERMORE -- Homeowners insurance has become a hot button issue at the State Capitol as millions of California residents struggle to find affordable plans after some of the major insurers decided to stop selling new policies in the state.

For months, major insurers have been cutting coverage in California, blaming devastating wildfires, increasing costs and strict regulation.  

Rumors have been swirling about a potential legislative deal to keep insurance companies from bailing on California.

The deadline has passed for it to come together in time for the end of the legislative session Thursday. Some consumer advocates say that's a good thing, noting it essentially would have been a bailout for the industry, possibly leading to huge rate increases. 

Livermore resident Sheri Ramsell told KPIX she was dropped by her insurance company after filing a water damage claim. She hasn't been able to find a new company to insure her home.

"Everybody has a pool in their backyard here and we're all cement, so there's really no fire risk," said Ramsell as she pointed at homes down her block. She has lived on the west side of Livermore off Concannon Boulevard for 17 years, and has had homeowners insurance through Mercury from day one. 

She said she's never had any major problems until one morning last December.

"The float on the back of the toilet stuck. I didn't even know that could happen. And it flooded everything in here," she said.

The water made its way into the walls, cabinets, carpets and subfloor.

"We did discuss, oh, if we turn in a claim, our rates are going to go up, but we had to do something because we didn't know how extensive the mold was," Ramsell explained.

The total cost to repair the water damage was about $35,000 and was eventually paid for by Mercury Insurance.

Last week, she got a letter from Mercury.

"It says notice of non-renewal," Ramsell read. It was a letter saying Mercury Insurance was dropping them as customers. The reason given: "Underwriting reasons. Loss history." 

Ramsell said at first she was shocked when she read the letter. Then she got mad. She said she felt it was unfair to drop her after one claim when she'd paid premiums to Mercury for 17 years.

"We didn't realize how bad it was going to be. We thought, 'Ok, well, now we've got to find a new insurance company. But then when we started calling, we realized, 'Uh-oh, we're in trouble,'" she said.

"I think you're going to see a lot more of that," said Fred Fisher, an insurance consultant with more than 50 years in the industry. 

He said consumers are having a difficult time finding a new company for homeowners insurance across California, even in areas that aren't considered a high-fire risk like Shari's neighborhood in Livermore.

That's because three major insurance companies -- State Farm, Allstate and Farmers -- have all publicly announced they are not writing any new policies for any homes anywhere in the state. They claim saying they are paying out too much money in fire losses.

"Insurance companies cannot survive having natural disasters and huge losses year after year after year. It's unsustainable," said Fisher.

As for Ramsell, she says she's done with California and is already packing up to move to Nevada to be closer to her daughter.

"This was kind of the last straw that made us want to go," she said.

But until she can get the house sold, she still has to find new insurance.

"We can't not have it, so we'll just keep calling until we find somebody," Ramsell said.

Insurance experts say the problem with finding new homeowners insurance isn't going away anytime soon and could eventually impact the millions of people who live across the state. The option of last resort is the California FAIR Plan, which offers basic fire insurance to homeowners who can't get a policy in the traditional marketplace.

KPIX 5 reached out to Mercury Insurance for comment. A spokesperson said their claims and underwriting teams would be looking into Ramsell's case.

Last week, advocacy group Consumer Watchdog called on State Attorney General Rob Bonta to investigate possible collusion to leverage higher prices in the industry. 

Consumer Watchdog founder Harvey Rosenfield said he believes companies are trying to derail Prop 103, which controls insurance rates in California.

"I'm convinced this is all about an attempt by insurance companies in the guise of wildfire and climate change to get the ability to avoid what voters mandated, which is fair pricing in insurance," explained. "The insurance industry is basically holding a gun to our head saying, 'You need to capitulate and pay the ransom or else we're going to fire the gun and leave the state.'"

Rosenfield says without a bill, companies will now try to put pressure on State Insurance Commissioner Ricardo Lara. He also noted consumer advocate groups  have been left out of the conversation so far.

KPIX reached out to the insurance commissioner and haven't heard back, but he told the Bay Area News Group that legislation is just one of many options. 

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