On February 3rd, it was announced that the LA wildfires, both in the Pacific Palisades and the Eaton Fires, were officially contained. Now that many displaced people are returning to the wreckage and deciding what to do next, they face some tough decisions and a whole lot of red tape. While Governor Gavin Newsom halted insurance cancellations and non-renewals in Los Angeles wildfire and adjacent zones, those dropped for reasons other than being in a fire zone may not be covered.
Attorney Steve Mehr, Sweet James Co-Founding Partner says, “If they wrongfully dropped your policy or acted in bad faith, you could have a legal case to force them to pay what you’re owed. If negligence played a role—whether from utility companies, government entities, or other parties—you may also be able to recover damages.”
So, while homeowners should ultimately be able to recoup some of their losses, it’s unlikely to be easy. Here’s what to do next if you’ve lost your home in the fires or if it’s been damaged beyond habitability—plus some good news if you’re considering buying a new home right now.
There’s A Good Reason Why Insurance Companies Don’t Want To Operate In Southern California
While the 2025 fires were the worst in California history, fires have historically been a major issue in Los Angeles. So, it’s understandable why insurance companies charge extremely high premiums or have pulled out of the coverage entirely. The numbers simply don’t add up when the state doesn’t maintain forests, clears the brush, or has adequate protection against arsonists. “With wildfires becoming more frequent and destructive, the numbers just don’t work for them anymore. Instead of adapting, they’re pulling out, leaving homeowners stranded. It’s not about loyalty or fairness—it’s about their bottom line. Unfortunately, that means hardworking Californians are the ones left picking up the pieces,” explains Mehr.
According to Leslie Farrow, Partner and Agent Licensee for HVH Insurance Services, after years of losing money, insurance companies were literally getting burned by operating in the state, potentially making the risk too high to operate. “In 2020, it was a record-setting year for fire losses in California. Four million acres and 10000 structures were burned—these were the largest losses ever recorded. 2021 saw another year of unprecedented fire losses, with 3629 structures burned. In 2022, 331000 acres and 1790 structures were lost; in 2023, 324000 acres and 58 structures; and in 2024, 1 million acres and 2148 structures. Additionally, between 2022 and 2023, the state suffered $3.5 billion in flood losses.”
While some of these events may have been unavoidable, Farrow tells me that during this time, the California Department of Insurance disapproved and forbade any premium increases for insurance carriers. “So, they were basically going insolvent in California, paying out more in losses than they were bringing in—an untenable situation for any insurance carrier because, eventually, they would fail and be unable to pay claims at all. So, they started shutting down operations in the state.”
Even those who paid their premiums on time for years were non-renewed. “These companies aren’t looking at your payment history or how long you’ve been with them—they’re looking at risk. If they think your home is too big of a liability, they drop you. It’s not personal; it’s business. But that doesn’t make it right. People who have done everything right are being left without protection at the moment they need it most,” says Mehr.
Here’s What To Do If You Were Dropped By Your Insurance Company
While the situation feels hopeless, it isn’t. Mehr advises contacting FEMA for emergency assistance and 211 LA for temporary housing to get through the next steps.
However, recovering damages isn’t generally a simple process—there’s a lot of red tape. Mehr recommends retaining an attorney. “If you were dropped unfairly, there could be a case against your insurance provider for bad faith practices. There’s also the possibility of legal action against any responsible parties for starting the fire. The key here is not accepting ‘no’ as the final answer—get legal counsel to review your options.”
While many have speculated about the source, authorities have yet to declare an official cause of both the Palisades and Eaton fires.
Collecting On Insurance Claims Takes Time
While those who lost their homes wish they could get cash and start rebuilding immediately, the reality is that this process takes time. Unfortunately, it’s unlikely insurance companies will issue checks overnight. Mehr explains, “Some cases settle in a few months, while others drag on for over a year. Insurance companies aren’t in a hurry to pay out, and if you’re filing a lawsuit, expect a fight.”
However, those with active insurance policies will have an easier time getting their claims paid. “If a client has an insurance policy, they just file a claim with their insurer, and it generally takes about two months for a total loss on a home. It can take up to six months or even more, depending on the investigation. At the end of the claim, the client is paid out on the home—much like an auto claim,” notes Farrow.
But There’s Good News For LA Wildfire Victims Who Want To Buy A New Home Right Now
However, those who want to purchase a new home and move on are in luck. They can buy a home priced up to $1209000 with no money down through a 203(h) Disaster Relief Loan. With the exception of VA loans, no money-down loans have not been available for well over a decade.
Agent Brock Harris of the Brock & Lori Team recently discussed this prime opportunity in a newsletter. “My real estate portfolio was built on these sorts of loans 20+ years ago. To get into a home for nothing. Let me tell you…it’s a nice feeling.”
Because there are no location restrictions on the loan, many people may choose to move out of Southern California to areas where prices are much lower. However, for those who choose to stay, Harris reveals that it’s not impossible to find a home within that price range. “No, $1.2 million doesn’t go far in Southern California, but it does, however, go further than most people think. In the last twelve months, 8400 homes and condos traded hands in the City of LA—half were under the $1209000 limit! And right now, there are 1700 homes for sale under that number and another 1000 condos. Looking at all of LA County, there are 10000 homes and condos for sale under the $1209000 limit! That’s a no-money-down house or condo for almost every single displaced person.”
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