Bruce Breslau is a communications professional who lives with his husband in the California West community on the historic Iverson Movie Ranch in Chatsworth. It’s got 290 units and its homeowners’ association (HOA) was recently slammed with the double whammy of Farmers Insurance terminating the community’s home insurance and a hybrid package of new insurance offered by multiple carriers that pushed the premium up 400% over the year before.
Moreover, the community felt railroaded by carriers into making a quick decision and ended up with a lot less coverage for a lot more money. Insurance brokers are making obscene commissions in these high-pressure situations, raising questions about whether there aren’t conflicts of interest in pushing expensive options.
In the spring, Farmers notified the HOA that they would no longer be providing coverage to HOAs and those in wild-fire zones. They had been offering full coverage of $92 million for the community for an annual $349,000 premium. The HOA’s longtime insurance broker canvassed one hundred insurance providers and found only nine willing to provide a bid.
“Carriers are not required to provide coverage estimates in a timely manner,” said Bruce. “Unfortunately, for some reason, the carriers would not disclose their bids for coverage until about two weeks before the policy would become active and the deposit of several hundreds of thousands of dollars was due.
“This practice is wide-spread and, on its face, places communities, and their HOAs under duress. There are no other reasonable options, and the need to bind insurance and find the sources for an extraordinarily large deposit in a truly short amount of time provides an unreasonable strain on HOAs, property managers, the HOA board, and all residents. Our board was able to scramble and arrange several meetings. However, a decision of this magnitude would usually be spread out over the course of several months rather than a few days to carefully review all options and provide them in a sane and reasoned fashion to the residents.”
“To provide full coverage in today’s environment, we were socked with a whopping $2.1 million premium, an increase of 500%. The most reasonable estimate we considered was a $1.7 million premium for $50 million worth of coverage, which represented a drastic reduction in our total coverage, but was still within limits that mortgage lenders have accepted. This approved option is a 400% increase over our previous premium.” That policy comes with a $250,000 deductible.
But the economic burden could push some people out of their homes and threatens the community’s makeup.
“Our community takes pride in the fact that we are diverse, middle class and are stewards of the beautiful property on which we live,” said Bruce. “We are comprised of families, those gainfully employed and retirees, seniors, people of color, those who identify LGBTQ+ and everything in between. In other words, Cal West is a representative cross-section of Los Angeles and California.
“This unprecedented increase translates to an additional $4,700 burden per homeowner on personal budgets that have already been stretched beyond their limits. This unforeseen assessment presents a special challenge for those in our community who are on fixed incomes or currently unemployed. This figure just covers our insurance for the year 2024-2025. Regular premiums and assessments of this magnitude are unsustainable from a homeowner perspective.”
At their July HOA meeting, the board said that homeowners could pay the entire $4,700 up front or make a $1,500 downpayment and then make nine additional payments of $355.56 from October 1, 2024, through June 1, 2025.
The carriers charging the $1.7 million premium are Genstar, which is offering a standalone policy including wildfire coverage, Mesa which is offering general liability coverage, USLI which is offering Directors & Officers liability insurance, Greenwich which is offering umbrella insurance, and Lloyds which is offering earthquake insurance. But no one has asked whether Genstar offers discounts for wildfire mitigation. “No one knows about discounts,” said Bruce.
Bruce doesn’t know what wildfire risk score was assigned to the community by Genstar or any of the other insurers. At the HOA meeting in August, he asked the broker who supplied the community’s risk score. “I did not get an answer as to what is our wildfire risk score, and when I asked that the broker went on a spiel on how these scores are derived from AI generators. And I said are you familiar with Zesty AI and he said no I never heard of it.” Zesty AI is a popular private black box software company generating wildfire risk scores from proprietary models that the Insurance Department allows home insurers to use but does not regulate.
His community has been evacuated twice and he believes that it needs wildfire coverage. “People said we have never had damage from a fire here,” he said. “I said one could also claim never to have had a car accident – but it can happen.” Still, he said he wants to know his risk score and how the insurance companies arrived at it. One more issue he raised at the August HOA meeting: “I said that I’d like to know what the score is and when the appeal will be filed by either broker or HOA board. I got blank stares. I said I want to know in the past 60 days what the board has done, and our management company has done.”
Right next door to the community is a large, evangelical church and he wants to know how its presence affects the community’s wildfire score. “They have a huge parking lot. The fire departments use the church as a staging area when fires are here. If we were appealing a wildfire score, I would say that has been used as a staging for the fire department for years and they certainly are not going to let a fire nearby get out of control.
Bruce also has concerns about whether brokers paid on commission have a financial conflict of interest in pushing policies that don’t provide adequate coverage in exchange for commissions that are rising just as quickly as premiums.
“I do think there’s an ancillary issue here with brokers. Our premium last year was $349,000; this year it’s $1.7 million. How does a broker avoid the appearance or actuality of conflict of interest and unjust enrichment?” In fact, when the HOA initially looked at an offer in June of $35 million worth of coverage versus their previous full coverage of $92 million, the broker first offered a premium of $1.1 million. When the community felt more coverage was necessary, the hybrid policy for $1.7 million for $50 million worth of coverage was offered three days later.
At the HOA’s August meeting, Bruce raised the issue. “The insurance broker was there, and I did ask, politely, how he gets paid — commission or fees — and, if so, how does he avoid ‘conflict of interest’ or the appearance of unjust enrichment. He responded that he gets paid a 10% commission. So, I asked where on a line item that appears for transparency. He snapped, “Do the math, you can do that, can’t you?” I explained I wasn’t good at math, so I decided to get a law degree instead. Doing the math, my neighbor and I found that in 2020 our insurance bill came to $175k. Last year, 2024, it was $349k. This year it is $1.7m. So, commission-wise, if my math is correct, from this one account he received $17,500 in 2020, $34,900 in 2023, and $170,000 in 2024. That’s just from our one account. He never answered the question about conflict of interest. He said he gets paid the commission from the insurance companies.”
At this stage, Bruce is wondering whether HOAs can band together to fight outrageous hikes in insurance premiums for drastically reduced coverage and he is turning to his elected representatives for help. Homeowners are also asking about comparables—what other similar communities are paying for insurance, and whether HOA boards and management companies can link with counterparts to share information and help in advocacy.
When asked at the HOA meeting what could be done, the broker was useless. “The broker stated that he believes that the only way this ‘crisis’ will be addressed is for the legislature to allow carriers to ‘carve out’ wildfire coverage,” Bruce said. That has already been done for California homeowners forced onto the CA FAIR Plan for wildfire coverage alone who often find they are paying more for less coverage and who are also forced to buy additional wraparound policies to cover everything else. The FAIR Plan will not cover communities such as Bruce’s.
“This isn’t sustainable,” said Bruce. “We are seeking legislation and regulation that would rein in these excessive costs as well as providing reasonable time periods for homeowners’ associations to appropriately consider options in this ever-changing landscape.”
