California’s insurance laws are a regulatory mirage, failing fire survivors

I am an aerospace engineer by trade, but for the last year my second full-time job has been fighting my insurance company. I am one of thousands of Eaton Fire survivors caught in a second disaster — not in the canyons, but in the fine print. 

After the tragic Eaton and Palisades fires, survivors looked to their insurers to help rebuild. We’d paid premiums for decades exactly for this moment. Yet we’ve been met with obstruction, delay and bureaucracy. 

Navigating this quagmire multiplies the trauma of those grieving the loss of their homes, belongings and community.

The California Unfair Insurance Practices Act was created in 1959 to protect consumers from such tactics. Unfortunately, every fire survivor has a story about their insurer violating it — rotating adjusters, ignoring emails and disregarding legally mandated deadlines. 

Yet, to date, there has not been a single public enforcement action related to these fires. California’s laws are a regulatory mirage: they offer the illusion of protection but vanish the moment a homeowner tries to invoke them.

The most insidious insurer violation is “toxic gaslighting.” Thousands of residents downwind of the fires are battling to abate smoke and soot damage, yet insurers frequently deny those claims, arguing that smoke doesn’t constitute fire damage. 

The soot that blanketed our communities contains carcinogens, including lead, asbestos and heavy metals. Yet insurers rarely pay for the industrial hygienist testing required to confirm the presence of such substances. Instead, insurers pressure homeowners to believe a simple vacuum and wipe-down will suffice. That leaves behind toxic particulates, putting residents at risk. Some victims have paid thousands out-of-pocket for their own testing, only to have their results ignored.

Under the current status quo, the Department of Insurance complaint process is a black hole. There is a near-zero response rate to homeowners who submit complaints. 

Only if the department receives an overwhelming number of complaints about a single insurer will it consider an investigation. Then, like with a class-action lawsuit, the state’s “market conduct examination” is a lengthy process that concludes well after a rebuild has finished, failing to offer timely recourse to the individual homeowner. 

For a survivor, time is a weapon. Most policies include “additional living expense” coverage that would pay for rent while a home is repaired, but in a post-disaster market where rents have skyrocketed, this fund is quickly consumed. 

We are not seeing the full consequences yet, but the outcome already is clear: families will soon face the choice of homelessness or accepting an unsafe settlement. 

Every ignored phone call helps drain the additional living expense funds. As the money runs out, people’s resolve weakens and unfair settlements become increasingly attractive. Delay has become a profitable business strategy.

And asking individual homeowners to face down the Goliath of insurance corporations while the state regulator idly collects statistics is untenable. 

Back in 1988, a California Supreme Court ruling stripped away consumers’ right to sue for violations of California’s unfair insurance practices law. By decreeing that only the Insurance Commissioner, not the victim, has the power to punish these violations, the court effectively removed any immediate consequence for insurer malfeasance.

Now California needs a radical shift to change this economic equation. We must restore the accountability lost in 1988 by creating a streamlined, administrative path for justice. 

We should allow the insurance department to validate complaints and pass them to administrative law judges, who can adjudicate individual violations in real-time. The judges would have the authority to decide a fair claim amount and levy a significant fine — paid directly to the insured, not the state.

This creates an immediate financial consequence for non-compliance and ensures that insurers’ bad-faith practices are no longer profitable.

Furthermore, any company-caused delay should trigger a “delay tax,” in the form of additional living expense payments, over and above the policy limit. If the insurer drags its feet, it — not the survivor — must foot the bill for people’s extended displacement. 

The insurance department’s complaint system also must be rebuilt, so it can provide real-time feedback and receive surge funding during disasters. To prevent insurers from hiding behind a lack of evidence, the Insurance Commissioner should establish an “ash zone” perimeter within which smoke damage is presumed and testing is mandatory. 

Finally, the state should launch a “Know Your Rights” campaign after every disaster, so insurers can’t exploit a survivor’s ignorance of the law.

Insurance companies are entitled to due process, but fire survivors are entitled to the good faith they earned by paying decades of premiums. Until the cost of non-compliance outweighs insurers’ savings from malfeasance and delay, California’s homeowners will continue to be victimized twice — once by a disaster and then by insurers.