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Natural disasters, be they hail storms or wildfires, are changing the insurance landscape in Colorado.
Homeowners are likely to feel the affects of the 2012 wildfire and storm season in the years ahead, just as they now are seeing the impact of past disasters, insurance officials say.
Miles from the Waldo Canyon fire burn scar in a hillside Monument neighborhood densely covered with pine trees, Bob Meeker has already begun to feel the effects of the devastating wildfire that burned hundreds of homes to the south of Hamal Drive neighborhood. In January, his insurance company, American National, canceled Meeker's homeowner's insurance after agents determined that his wildfire mitigation work -- removal of all the scrub oak around the house -- was not sufficient. Meeker has spent the past month shopping for companies that will insure his home.
"Maybe it's perfectly legal for what they have written in the fine print in the contract," Meeker said in early February, days before his insurance was set to expire. "All the companies from State Farm to Farmers -- they are gun shy. Everybody has to do mitigation."
Like Meeker, homeowners across Colorado will feel the heat of wildfire damage this year, even if their homes and neighborhoods are far from a burn scar. In response to the burgeoning wildfire risk and resulting damage, insurance premiums will most likely continue to rise over the next couple of years, according to officials with the Colorado Department of Regulatory Agencies. Homeowners who saw spikes in premiums in early 2013 are likely seeing the after- effects of previous summers of damaging hailstorms, another natural phenomenon that makes insuring Colorado homes a risky business.
As Meeker grapples with his neighborhood's new status as a "fire hazard" zone, other El Paso County residents are waging battles against insurance companies who, they say, have denied their claims of hail, flood, or fire damage. Some have appealed to state legislators to intercede on their behalf, asking for more time to repair damage or replace destroyed items; others have given up in their struggle for settlements.
Wildfires in Colorado have affected insurance premiums for more than a decade, said Carole Walker, executive director of the Rocky Mountain Insurance Association.
"Even from the Hayman fire 10 years ago back in 2002, insurance companies started to examine wildfire risk, and seeing whether they could take it on," she said. "Insurance companies -- the trend over the past 10 years -- have been getting stricter about what properties they insure."
Whether or not homeowners like Meeker do wildfire mitigation is now a large concern for companies when people buy insurance, Walker said.
"If somebody bought it (homeowners insurance) 10 or 15 years ago, nobody would have asked that question," she added.
During the 21 years that Meeker has lived outside of Monument, he said he has never filed an insurance claim; in the six or seven years that he has been insured by American National, he has never had any damage to his house.
But following the Waldo Canyon fire, which burned at least 346 homes and killed two people in June, Meeker's Hamal Drive neighborhood was seen in a different light by insurance companies. The terrain is covered in trees, some of which stand close to houses -- it has the same feel as neighborhoods in Peregrine, Cheyenne Mountain area and Mountain Shadows, all of which abut forests, open spaces, or have been planted with pine trees. There are many names for such neighborhoods -- red zones, wildland urban interface, hillside overlay -- but all titles point to one risk: Wildfire.
Last fall, American National agents came to inspect Meeker's property. They told him to create a defensible space around his home -- a 30-foot buffer between the structure and any vegetation that might catch it on fire. Meeker had firefighters from the Tri-Lakes- Monument Fire Protection District visit his home as well, and advise which plants to take out. Ultimately, the Meekers cleared away all the scrub oak surrounding the home. But they left some bigger trees, under 15 feet tall, within 10 feet of the home, which firefighters told him to keep.
American National did not respond to The Gazette's request for comment.
"The American National people came up there like three times, and they said that, 'You'd be ok'," Meeker said. Firefighters told him that with the scrub oak gone the property was well mitigated. "If a fire comes through like Mountain Shadows, what they've done is good enough for the kind of fire that they'd have to fight -- a ground fire," Meeker said the firefighters told him.
But in December, the Meekers received a cancellation notice in the mail from American National: "Due to the added fire hazard presented by the density and proximity of native vegetation, your agent will assist you in determining if anything can be done to make your property insurable."
After settling hundreds of claims in Mountains Shadows and for others in the state, it is not surprising that insurance companies are raising their homeowners insurance rates and examining their clients' properties closely, said Walker. That is, after all, how homeowners insurance works, she added.
"I think the message to homeowners is -- we've seen the risk play out, the most expensive, devastating wildfire in history -- to make these communities safer," Walker said.
Insurance companies will look at individual homes as well consider entire neighborhoods. When Meeker was shopping around for new homeowners policies, he found that the lack of mitigation in his neighborhood drew agents' attention.
"The guy from State Farm was impressed with my mitigation," he said. "Then he said, 'You do live amongst the trees.' And the agent understands that. The bottom line is, very few houses on this street do mitigation."
But El Paso County residents like Meeker are insurable, Walker assured. Colorado has what she calls a "stable competitive market" - - there are companies who will insure properties such as the Meeker's.
How it works
Although he recognizes that American National has every right to cancel his policy, Meeker believes that the whole process was "not quite right," he said.
It is within the rights of insurance companies to raise rates or issue non-renewal notices, said Bobbie Baca, supervisor of consumer affairs at the Department of Regulatory Agencies' Division of Insurance. Colorado homes have fallen prey to risks other than wildfire; hail, flash floods, tornadoes and blizzards have influenced insurance premiums in recent years.
In the eyes of firefighters and insurance companies, living in the red zone is far riskier than living in downtown Denver, Baca added. El Paso County has one of the largest numbers of residents living in red zones -- 35,000 people, or a quarter of the county's population. "The insurance companies base all of their rates off the risk that is presented," Baca said. "Then the insurance companies charge premiums that are appropriate for that risk."
Judy Brinkman, whose home on Vanreen Drive survived the Waldo Canyon fire, is one among many of her neighbors whose insurance rates went up with the passing of the old year. But in reality, most rate hikes lag by at least a year, so Brinkman's rate spike could be the result of hail storms a year ago, said Vince Plymell, a Colorado division of insurance spokesman.
"Increases this year are not necessarily reflective of last year," Plymell explained. "There is usually a year's lag in terms of that. Any sort of changes as a result of the fires could actually be coming in a year or so. That's usually the case in terms of the industry as a whole."
Call for change
While consumers might be at the mercy of the commercial needs of insurance companies, there is some need for push-back by consumers, Walker said -- especially as the potential for flood and fire disaster in Colorado continues to mount. Walker has joined groups of wildfire survivors from Larimer, Boulder and El Paso counties in pushing for legislation that could change some fundamental aspects of insurance, such as deadlines for replacements and repair work, among other things.
"We have been talking to legislators. There are people pushing for some type of legislation that would address issues that emerge in diaster situations," Walker said. But movements to change insurance companies' policies must be handled carefully, Walker cautioned. "Given the current climate -- increased catastrophes, rising premiums -- we just need to be careful that we don't fundamentally change the way homeowners insurance works."
In other words, rising premiums and non-renewal notices are a natural part of the cycle, especially as homes become larger and more expensive, and require more money to repair, insure or replace, Walker said.
"We have a perfect storm situation. We're seeing rising premiums and increased volatility," she added. Walker said there is currently a "political push" to limit how companies adjust their rates.
Until this year, there has been little interest or support for insurance-related legislation in Colorado, said Boulder County Rep. Claire Levy. After the Four Mile Canyon fire outside of Boulder in 2010, Levy tried to introduce a bill that would give homeowners two years, not one, to replace losses or repair damages from wildfires and other disasters. The bill was killed by a straight party-line vote, Levy said -- Democrats voted for it, and Republicans voted against it. This year's bill has similar provisions, which include alternatives to itemizing destroyed house contents, and will hopefully meet with more success, Levy said.
"I am pushing hard," she said on Thursday. "I am trying to put the teeth back into it, and I think that I am gong to be able to pass it because so many people were affected."
The pool of affected homeowners -- whether they suffer damage from hail or fire -- will most likely grow, said Walker. For the past few years, Colorado has been hit by some of the most damaging, therefore expensive, hail storms in state history, Walker added.
"You are seeing premiums increase to respond to those patterns and trends over time," she said. "We just have too many people living in high risk areas. It's a recipe for diaster and unfortunately we all end up paying for that in our insurance premiums."
Contact Ryan Maye Handy: 636-0261