State Farm -- the state's largest insurer -- is asking California's Department of Insurance for a 17% emergency rate hike.
The company has already put in other rate requests over the past year, but this emergency request comes as a direct response to the deadly Los Angeles County wildfires in January which destroyed more than 18 buildings -- most of them homes.
A consumer watchdog argues policy holders shouldn't be on the hook.
With catastrophic wildfires becoming commonplace in California, the home insurance market is in crisis. State Farm says it's been slowly losing money for the last 10 years. On Tuesday in Oakland, its lawyers sat before Administrative Law Judge Karl Seligman to argue that an interim rate hike is justified to keep the company solvent.
They said that's not nearly enough to pay claims if another disaster should strike. There are even warnings that the company's policies may soon not be acceptable to some lenders for people seeking mortgage loans. The company is asking Insurance Commissioner Ricardo Lara for the emergency rate hike that would be imposed on all State Farm policyholders statewide to refill its cash reserve.
"It is not in California consumers' best interest to allow State Farm General, the largest property insurer in California by far with 20% market share, to go bankrupt or to otherwise withdraw from the California market," said California Department of Insurance attorney Nikki Kennedy.
"The way it's been engineered by State Farm, it's a fast track," said Rosenfield. "They want the commissioner to approve their rate increase now, and then figure it out later whether it was justified or not. That's not how the law works in California."
"We've been demanding this information for nine months. And last night, on the eve of this hearing, State Farm sent us six documents," said Rosenfield. "We haven't even had a chance to look at it."
"Can we just get the facts here," Susman asked. "If they need the rate increases, show us the proof. Nobody cares if it was submitted an hour late or a day late. If the proof exists, let's see it. Let the insurance commissioner decide what he's going to do."
"Normal rules don't apply," said Kennedy. "We're on the Titanic, and we see the iceberg. Now, is not the time to argue about where to put the deck chairs. There is still time, your honor, to turn this ship around. If we don't, over three million Californians are going in the water. And there are not enough lifeboats."
It's probably not a stretch to compare California's insurance market to a sinking ship. Now the judge will decide if State Farm's claims of poverty actually hold water.
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