The Cost of Wildfires… and Insurance… to California Farmers

Farmers in California are having a hard time getting fire insurance for their farm structures and equipment. Insurance companies are dropping coverage on existing farm customers and choosing not to insure new operations. Even where farmers can get insurance, it is double or triple the cost of what it previously was. About 500 farms in Napa and Sonoma counties alone have lost coverage in the past few years. This comes after the worst fire season in history for the Golden State, and the situation is only poised to get worse.

Farmers aren’t the only ones having these troubles. Across the state, 950,000 residential customers lost their fire insurance between 2015 and 2019. Fortunately, residential (and commercial) customers have a backup plan. The “FAIR Plan” provides fire insurance for high-risk properties that traditional insurance companies won’t insure.

The FAIR Plan has some issues, however, and for farmers, it has some major ones. As the association’s website says, it is not meant to be long term – it is a “temporary safety net – here to support them until coverage offered by a traditional carrier becomes available.” The program identifies as the state’s “insurer of last resort.” Things that are the “last resort” usually don’t come cheap. This is true for the FAIR Plan, which increased its rates by 15.6 percent this year, after a 20 percent increase in 2018. Yowsers. That doesn’t feel very fair.

The real downside for farmers is not the price tag (although that is hard to swallow). The big problem is that it actually excludes farms altogether. Farmers can use the FAIR Plan to insure their home and also a storefront, if they have one on the farm property. After all, the FAIR Plan covers residential and commercial structures. But, it does not cover farm equipment or structures, which is no small potatoes.

Scott Newman, a farmer in Sonoma County, can attest to that. He lost nearly everything on his 500-acre farm when a wildfire came through in 2019. Fortunately for him, his insurance covered the losses and he rebuilt. But as he prepares for the next wildfire season, he doesn’t have the same assurance because his insurance company stopped covering farm equipment and structures. On the bright side, they are continuing coverage of his home and he has crop insurance to cover his vineyards and cattle. But, between his irrigation pumps, forklifts, pickup trucks, hay barns and a bulldozer, as he reports to Civil Eats, this adds up to $1 million of property left uninsured. That’s not a small amount of money to pay out of pocket if it were to all go up in flames.

But, before farmres throw their hands up in the air and give up (please don’t…we need you!), all hope is not lost. The California Farm Bureau Federation has made affordable fire insurance for the state’s farmers and ranchers Priority Number One for 2021, and they are making good on that promise. As Wine Industry Advisor reports, Just this Tuesday, May 24, the Napa County Farm Bureau hosted a meeting with the California Insurance Commissioner, Ricardo Lara, and local growers and vintners, to focus on the challenges with wildfire insurance, and opportunities for overcoming these challenges.

One glimmer of hope is Senate Bill 11. This bill would remove the farm exclusion from the FAIR Plan insurance. It passed the California State Senate Committee in April and is continuing to make its way through the legislative process. This will be one to keep your eyes on if you’re farming in California…

Another topic that was raised at the meeting was wildfire mitigation. It appears that insurance companies are not paying attention to the steps that farmers and ranchers are taking to reduce the risk of wildfire damage on their properties. Scott Newman, the one who talked to Civil Eats about his struggle with wildfire insurance, can speak to that. He did all kinds of things to mitigate damage like installing metal roofs instead of wooden ones. He keeps his tractors and trucks away from the vineyards (aka fuel). But, his insurance company still chose to not extend coverage.

So…Things feel dire, and this is distressing. But, with so many farmers in the same… field… This problem can’t be ignored. We all have to eat, and farm business owners simply can’t shoulder this burden alone. While a solution takes shape, farmers can take a close look at their property insurance policy. Folks should give a call to their insurance agent and review coverage for all the risks relevant to the operation.