Some in Hazard Areas Lose Coverage : Policies: ‘It’s tougher to get renewals . . . in areas considered potential fire areas, and the main reason is because we had the fire,’ a Laguna Hills insurer says.

Raymond Rubio, a firefighter for seven years, considers himself a victim of last year’s firestorms.

His Laguna Hills tract home--seven miles from the Laguna Beach fire--is unscathed. But two months ago, Rubio was abruptly told that his fire insurance policy was being canceled. The reason: “a significant exposure to brush,” a reference to a creek bed that lies a football field’s length away from Rubio’s front door.

Rubio, a Los Angeles County firefighter who battled the Malibu blaze and knows the ins and outs of fire prevention, was shocked.

“We’re just homeowners in a residential area,” said Rubio, 35. “I don’t think I’m being fairly treated. I could see if I was in a place that had a major fire before, but they are kind of running the gun a little bit.”

Rubio is one of the casualties in what insurance experts call an “industrywide crisis.” Insurance companies are reeling from a quick succession of major disasters--first the Altadena fire, followed immediately by the Laguna Beach and Malibu fires, with the Northridge earthquake jolting the Southland less than three months later. Only two years earlier, some 2,700 homes were incinerated when fires swept across Oakland. Insurance companies have been hit with more than $10 billion in claims from residents whose homes were destroyed or damaged in the earthquake or fires.

Companies, fearing financial ruin, have begun to re-evaluate their clients, weeding out those whose property they deem at high risk for brush fires.

Rubio is not alone. The Laguna Beach City Council has identified three residents whose homeowner policies have been canceled, said City Manager Kenneth C. Frank. A spokesman for Fireman’s Fund Insurance Co. said there were 36 non-renewed policies in the Laguna Beach area this year.

Since January’s quake, Glenn Robinson, owner of Robco Insurance Services in Laguna Hills, has received about 30 to 40 calls from non-renewed homeowners begging him to refer them to a carrier.

“It’s tougher to get renewals and insurance in areas considered potential fire areas, and the main reason is because we had the fire,” Robinson said. “It’s a tough market for homeowners. I’ve been in this business for 23 years and I’ve never seen it this tough.”

There is no central clearinghouse that documents numbers of non-renewed insurance policies. However, the California Department of Insurance began tracking complaints after 58 homeowners in a single week said they had received non-renewal notices. Rubio’s insurance company admits to dropping policies worth $3.5 million in premiums in the last five to six months, or about 10% of its total premiums, in an effort to reduce its risk exposure.

Rubio said he has lived in his two-story home on Sara Lane for three years without making a claim. In a cancellation letter his company said Rubio’s home was situated within 300 feet of a dry creek bed. But after county fire inspector Robert Frick examined the neighborhood at Rubio’s request, he told the homeowner it rated a 3 out of 10 on a scale of hazard zones and was not a fire risk. What the insurance company called a dry creek bed is the “Aliso Creek trail,” where an asphalt bike trail lies along the edge of a four-foot-wide stretch of creek bed with running water.

Doris Kagley, 64, is another non-renewed policyholder. The Laguna Beach resident has been with Fireman’s Fund for three years without making a claim. But in August she received a letter telling her that her policy would not be renewed because of her home’s “proximity to hazardous brush/risk (areas) . . . it does not meet the underwriting guidelines of 1/4-mile brush clearance.”

“I was shocked. At first I couldn’t believe it,” she said. Kagley’s one-story home on La Mirada Street lies about two miles from the site of the fires last October. A canyon, about 10 yards away, is considered by the company to be a fire hazard. She pointed out that it has never caught fire in the 12 years she has lived there.

Kagley said her area may be a risk, but “almost everybody lives near a canyon.”

“That would certainly do a lot of people in,” said the former Orange Coast College counselor. “On one hand, I could see why they’d be wary. But on the other hand, I don’t know why any companies are in the insurance business if they are afraid of risk. . . . I don’t believe the insurance companies are broke. I think they have plenty of money. I don’t think it’s fair.”

City manager Frank said officials have held three meetings with some major insurance companies to discuss what the city is doing to improve fire safety. The meetings were initiated by the homeowners’ association in Mystic Hills, one of the areas hardest hit by the fire. “Most companies are very positive,” Frank said.

Insurance companies say they have no choice but to drop higher-risk clients. Rubio’s insurer, Residence Mutual, has been “severely hurt by the earthquake and put in a position where we no longer have a surplus. We have to reduce the number of policy holders,” said Vice President Stephen Wasulko.

The company had “not necessarily been inspecting every house” when it originally issued policies, Wasulko said. “We had to come back and evaluate what (policies) we should be writing. Those who live in brush areas, have a history of frequent losses, those are the ones that we reluctantly have to discontinue.”

Wasulko acknowledged that the insurance crisis “does make a real problem for the policyholder and we deal with that everyday. We just have no choice at this point in time. . . . I feel for the customer.”

“California is in a unique situation,” said Stephen Dreyer, director of ratings at Standard & Poor’s Ratings Group, a firm that tracks the industry. “We see the companies looking much more carefully, in a minute, detailed way, at their concentrated risk. Their alternatives are pretty limited. It’s not a pretty picture for the consumer.”

It’s not just current homeowners who are feeling the pinch. Anyone buying a home must obtain fire insurance before lenders will approve a loan, and beginning about four months ago, that became much more difficult, up and down the state, said Rita Payenaka, a Century 21 real estate agent in South County. “Major carriers are not carrying and secondary carriers are running out of surplus money. They are either not covering or are pulling their coverage. The first thing we have our customers do is look for insurance. It really affects first-time buyers.”

About 75% of the companies that sell homeowner insurance in California, such as 20th Century Insurance and Republic Insurance Group, are not accepting any new business. Others have sharply pared the number of policies they are writing, among them Allstate, State Farm and Farmers, according to the California Department of Insurance.

Almost every insurance carrier is rewriting its guidelines, said Linda Mallory, Department of Insurance associate underwriting officer.

Mallory said many insurers issue “hundreds of policies a month” through mortgage companies, only doing spot checks to assess property. But after dramatic losses this year, carriers are “checking up on every piece of business. They are looking at, for instance, Laguna Hills,” she said. “No one ever thought a firestorm was going to happen.”

The fires have exacerbated an already shaky insurance situation. Under California law, insurers must offer earthquake coverage with homeowners policies. After the Jan. 17 temblor, many larger companies have limited the number of new policies they sell, wary that claims from another quake as big or bigger than last January’s could financially ruin them. Others have completely stopped writing new policies.

Rubio, who has shopped around for a new policy, knows that firsthand. “I’ve gone down the list of all the major companies. There is nobody writing policies,” he said. When a company did offer a policy, the cost was outrageous, Rubio said. He is now finalizing coverage with a small Hollywood firm, Century National, for a slightly higher annual premium but a nearly doubled deductible.

The policy of Pam Otto, 46, who lives close to Kagley on Wykoff Way, was canceled by Fireman’s in August.

“I was outraged. I thought, ‘Why the heck would they do something like this? We have a perfect record,’ ” the Laguna Beach resident said. “It seems real haphazard, very subjective. I never saw them come out and inspect the area. There needs to be a lot more homework done by the insurance companies.”

A spokesman for Fireman’s said the company is now conducting a statewide re-examination of brush-country areas that afford poor accessibility to firefighting vehicles and contain houses with wood shingles.

Kagley said she found a local agent, but in order to transfer companies, she must also buy automobile insurance with the company. “I’ve been with the Auto Club for 40 years and I don’t want to change it now. They kind of have me over a barrel,” she said.

Most of the companies she spoke with charged much more than she was paying, she said. “As a retired person, I have a set salary. I couldn’t afford most of the other policies. I had two other quotes for twice the amount I was paying.”