While each side has its self-proclaimed experts, no state or federal standards govern this new frontier of urban mega-fires. Realizing this, the California Department of Insurance formed a task force in May and gave it a critical mandate: to write guidelines, grounded in science, that could influence new state laws and insurance standards for testing and clearing smoke contamination. The task force is scheduled to deliver its recommendations to Insurance Commissioner Ricardo Lara early next year.
For a distinguished example of explanatory reporting that illuminates a significant and complex subject, demonstrating mastery of the subject, lucid writing and clear presentation, using any available journalistic tool, Fifteen thousand dollars ($15,000).
Susie Neilson, Megan Fan Munce and Sara DiNatale of the San Francisco Chronicle
For their series “Burned,” which showed how insurance companies using algorithmic tools have failed Californians who lost their homes to fire by systematically undervaluing their properties, denying claims and making it impossible for them to rebuild.
Winning Work
April 2, 2025
Using faulty algorithms and flawed processes, the state’s biggest insurance companies routinely underestimate what their clients will need to rebuild. For wildfire survivors, it's a gut punch at the worst possible time.
By Susie Neilson and Megan Fan Munce
Mike Kubo had found only enough time to grab a few bags of dirty laundry when he and his family evacuated their home after hundreds of lightning bolts set the Santa Cruz Mountains ablaze.
Now, he was 20 miles away in the spare bedroom of his parents’ mobile home with his wife, his daughter and their two cats. They huddled around Facebook on Kubo’s laptop as a neighbor posted doorbell camera videos of the fire. Every few minutes, new footage appeared.
First, the fire swallowed homes across the road. Then flames engulfed the neighbor's white truck and yard.
Until that moment — on the night of Aug. 19, 2020 — Kubo had tried to convince himself that the fire would not reach his two-story Tudor house in rural Bonny Doon. But then the neighbor posted that his feed had gone dark.
“We were like, yeah, OK. That’s it,” Kubo said.
He and his family sat on the bed, crying.
One consoling thought reached him: At least he’d upped their insurance. Eventually, they would be made whole.
He was wrong. In the end, contractors would charge the Kubos $1.4 million to rebuild their home — roughly half a million dollars more than what their insurance would cover. The insurer, State Farm General, had vastly underestimated the cost of rebuilding when setting the coverage limit.
After every major California wildfire of the 21st century, families like the Kubos, who paid insurance companies for years, have learned that their policies wouldn’t pay them enough to rebuild. This phenomenon, known as underinsurance, is typically attributed to inflation and the rapid surge in reconstruction costs following mass catastrophes.
But the primary driver of the problem is insurance companies’ reliance on a fundamentally broken system to predict rebuilding costs, which leaves many fire victims without homes and slows the rebuilding of entire communities, a Chronicle investigation has found.
Most major insurers rely on software algorithms underpinned by faulty data to set coverage limits for their policyholders — despite knowing the tools routinely underestimate what their clients will need.
A critical element of virtually every homeowner’s policy is the amount the insurer will pay to replace a destroyed home. This figure, called “Coverage A,” is generally located in the first few pages of the contract. Insurers use complex algorithms called replacement cost estimators to come up with a coverage limit. Customers can ask for a higher dollar amount, but few have any idea if the figure will be adequate, and most simply accept the figure placed in their paperwork.
The leading estimator tool is 360Value, sold by the insurance analytics firm Verisk and used by insurers representing two-thirds of the U.S. market.
The Chronicle found that the data 360Value relies upon is frequently outdated and incomplete. Agents who use the tool rarely take the time to verify details. Thus, 360Value persistently understates the cost of rebuilding homes, often by hundreds of thousands of dollars.
At least four of California’s largest home insurers — State Farm, Farmers Insurance Group, CSAA and USAA — have known for years about these critical gaps from lawsuits and government investigations. Yet all continue to use 360Value to set coverage limits for their policyholders, without telling customers of the program’s known flaws.
USAA did not respond to repeated requests for comment. State Farm, Farmers and CSAA declined to be interviewed. Instead, they pointed the Chronicle to Rex Frazier, president of the Personal Insurance Federation of California, and Janet Ruiz, director of strategic communication for the Insurance Information Institute — both industry groups.
Frazier said the idea that insurance companies would intentionally act to underinsure their clients was “nonsense.”
“It doesn't make sense that we would want to make less money on renewals and not pay claims,” Ruiz said. “Our whole premise as an industry is to help our customers, pay our claims, make sure they get back to where they were before their loss.”
In a written response to the Chronicle's questions, Verisk said the estimates its algorithm produces should not solely determine coverage limits but instead serve “as an advisory tool” for insurance underwriters. In a separate interview, Verisk executives said homeowners are ultimately responsible for choosing how much coverage to buy.
“I never use the word ‘accurate,’ because the reality is there are all these other variables,” said Trish Hopkinson, Verisk’s head of 360Value. “But with all the data that goes into this, I feel that the tool itself functions at the highest level. I think that's apparent by our market share.”
That insurance companies would set inadequate coverage limits seems counterintuitive, because more coverage generally means higher premiums and higher revenue.
But it’s not that simple. Customers, bombarded with advertisements featuring celebrities, oddball mascots and catchy slogans, have been told over and over by insurers that they should seek low prices and quick estimates. For the companies, offering a lower coverage limit means they can offer a lower price, attracting more customers.
Insurers’ use of replacement cost estimators has led to widespread underinsurance among wildfire victims, said Amy Bach, executive director of United Policyholders, an insurance consumer advocacy group.
“The No. 1 factor is the calculations that get done at the point of sale not being accurate,” Bach told the Chronicle. “Insurers lowball what it's going to cost to put a dwelling back, because they want to close the deal and sell the policy at a price the person can afford.”
Seeking to understand the role that replacement cost algorithms like 360Value play in underinsurance, the Chronicle reviewed thousands of pages of court and regulatory records.
These included a trove of employee depositions and corporate records filed in a lawsuit against Farmers, the second-largest home insurer in California. The documents show the company learned that its agents rarely corrected errors in 360Value's data, which led the program to routinely underestimate rebuilding costs. But rather than fix its methods or switch to a different product, Farmers increased its reliance on 360Value, flaws and all.
Reporters also interviewed dozens of insurance and homebuilding professionals about the algorithm — and bought a subscription to 360Value. They found it often relies on inaccurate data on both the houses it analyzes and the price of labor and supplies.
The estimator algorithms treat a home like a box of Ikea furniture, attempting to pull apart exactly how many nails and doors are inside, the square footage of the flooring and the gallons of paint needed to cover walls and ceilings. By multiplying each component by its cost, the tools estimate what it would take to replace the entire structure. They’re easy to use, allowing agents to generate estimates in minutes without ever setting foot on the properties.
360Value draws from sources that contain outdated or misentered data, such as county assessor records , then automatically populates this data, or “prefills” it, into the forms insurance agents use while writing policies.
When data is missing, the algorithm makes an educated guess to fill the gap. An internal Verisk report from 2019 found that 360Value’s prefill data for a key home characteristic — foundation shape — was wrong half of the time. Verisk acknowledged that its tool was not consistently accurate, and was less reliable for high-value homes, which are common in California.
As wildfires become more frequent and severe, underinsurance is poised to devastate ever more homeowners. In Los Angeles, survivors of this year’s catastrophic Eaton and Palisades fires are learning that their insurance payouts will amount to far less than what they’ll need to rebuild.
“Some people are so drastically underinsured, it jumps off the page,” Dan Veroff, an attorney specializing in insurance law, said of the Los Angeles survivors who’ve contacted him since losing their homes.
No study or survey has determined the precise number of California homeowners who are underinsured.
But the problem’s vast reach is evident in communities that have burned. Regulators and consumer advocates have identified widespread underinsurance following wildfires not only in California but in Colorado, Texas, New Mexico and Washington state. Researchers in Colorado analyzed insurance claims data from a 2021 blaze near Boulder and found that three-quarters of the houses lost or damaged were underinsured.
Underinsured victims must tap their savings to rebuild, construct smaller or lower-quality homes, sell their lots and become renters, or leave their communities altogether.
Widespread underinsurance doesn’t just prevent individual homeowners from rebuilding — it stalls out recovery across whole communities.
Seven years after California’s deadliest wildfire, which killed 85 people and destroyed 11,000 homes in Paradise (Butte County), fewer than 2,800 have gone back up. As of last month in Santa Cruz County, residents had rebuilt only 144 homes out of the 700 that burned in the lightning fires of 2020.
In Grizzly Flats, a small mountain community in El Dorado County, a clear line separates where the Caldor Fire burned three years ago and where it didn’t. On one side are cul-de-sacs of homes surrounded by trees so thick you can’t see from one front door to the next. On the other are naked hills of iron-rich orange dirt, dotted with stark white trailer homes brought in by struggling residents. More than 400 houses burned, and fewer than 30 have been rebuilt.
“Many of those people will probably live in trailers the rest of their lives,” said Jennifer McKim-Hibbard, co-founder of the West Slope Foundation, a wildfire survivors’ advocacy group. After losing her home in the Caldor Fire, McKim-Hibbard found she didn’t have enough insurance to rebuild; she now rents a home in the area with her husband and two boys.
In the charred half of Grizzly Flats, one of the few replaced homes belongs to Linda and Richard Salazar, a couple who purchased $341,000 in fire insurance coverage based on the recommendation of their Farmers agent. After a contractor said it would cost over $548,000 to rebuild, they settled on replacing their home with a manufactured, or prefab, unit.
It’s a far cry from what they once had. Cracks blemish the ceilings and the kitchen tiles, and rodents have infested the house through gaps under the sink. The shower has no bar for Richard, an 81-year-old Vietnam War veteran, to hold for support. After they moved in, a sewage leak left gallons of waste rotting beneath their floor.
“We’d expect after losing our home in a fire, we’d get insurance money, we’d recoup, we’d go on with life,” Richard said. “But we’re still dealing with this. The Caldor Fire isn’t over yet, because we’re still getting burned.”
The trade-off
The software programs behind California’s underinsurance crisis were originally marketed as solutions to underinsurance.
With the rise of personal computers and the internet in the 1990s, insurance companies began adopting what they called total-component cost estimation algorithms. Insurers had used imprecise methods to estimate rebuilding costs since the 1970s — simple formulas based on the number of rooms or a home’s square footage, calculated by agents or homeowners using rudimentary mathematical tables.
Component-cost algorithms promised to be more sophisticated. Pioneered by Marshall & Swift/Boeckh, a construction analytics company, the algorithms combined data about a home’s characteristics and the price of materials and labor to approximate the cost to rebuild the exact house.
The tools were revolutionary, Peter Wells, the inventor of the technology, told the Chronicle. They accounted for details a simple square footage or room calculation could not — like the increased cost of building on a slope, said Wells, who was Marshall & Swift/Boeckh’s president until his retirement in 2010.
“You could actually identify salient characteristics of properties and then price those in a computer almost instantly,” he said. “That had never been done before.”
Marshall & Swift/Boeckh built a database of 55 million U.S. homes by calling and quizzing tens of millions of people. What kind of roofs did they have? Were their exterior walls brick or stucco? Wells said the survey took up to 10 minutes per home, then the algorithm combined that information with research about building costs in different locales.
But for the tools to work, Wells said, insurers had to want them to be accurate. He got the sense they didn’t always prioritize that. Sometimes, Wells said, insurers complained the estimates were too high and pressured him to remove certain costs, such as for below-ground work, from the estimator.
“People would come and say, ‘We can be more competitive if we get these costs out, ‘cause we’ll have a lower cost,’” Wells recalled.
Lower coverage limits allow insurers to offer lower prices, which is the primary way insurance companies attract new customers, said Jay Feinman, a professor emeritus at Rutgers Law School and author of “Delay, Deny, Defend: Why Insurance Companies Don't Pay Claims and What You Can Do About It.”
Jeff Dailey, the former CEO of Farmers Insurance Group, indicated in a 2018 deposition that his company was more concerned about the time it took to run an estimate than the number it produced. The work required to ensure estimates were accurate, he said, would annoy customers and drive away business.
“It wouldn't surprise me that we tried to make an intelligent trade-off between what needed to be asked to get an accurate estimate and where we were sort of bleeding into ruining the experience for the customer,” Dailey said.
After all, the only customers who approached their policy limits were those whose homes were totally destroyed. Such total losses were once exceedingly rare.
But that has changed.
In 2003, a hunter lost in a forest east of San Diego lit a signal fire. The resulting runaway blaze ignited thousands of acres within hours, breaching city limits. What would become known as the Cedar Fire and several other Southern California wildfires collectively consumed more than 3,700 homes that year.
Survivors soon confronted a second disaster: Hundreds were underinsured. Fifteen months after the fire, just 10% of destroyed homes in unincorporated San Diego County had been rebuilt.
Over the next two decades, a swirl of factors including climate change, drought and failures by power companies worsened California’s infernos. Eighteen of the 20 most destructive fires in state history have occurred since 2003, destroying roughly 63,000 homes, businesses and other structures.
Profound levels of underinsurance now surface after nearly every major blaze. From 2007 to 2020, the consumer advocacy group United Policyholders collected post-disaster surveys, finding that anywhere from 42% to 66% of survivors who responded said they were underinsured.
Since 2003, people with homes ruined by fires have submitted 888 underinsurance-related complaints to the California Department of Insurance . This number doesn’t capture the severity of underinsurance, said Bach, because the vast majority of people grappling with the problem do not formally complain.
Partially in response to these complaints, the department launched a series of investigations into how major insurers handled claims following the wildfires of 2015 and 2017. Regulators found that three — State Farm, CSAA and USAA — used 360Value in a manner that directly caused steep underinsurance for wildfire survivors.
State Farm and CSAA are two of the three largest home insurers in California. USAA is the sixth largest. Another department investigation into Farmers is pending. Together, these insurers represent 40% of policyholders in the state.
In one case examined by regulators, after State Farm used an early version of 360Value to recalculate a homeowner’s coverage in 2010, her policy limit dropped by almost half. Five years later, when the woman lost her home in the Butte Fire, she was underinsured by $174,000.
In another case, the department said, a State Farm agent ran 360Value 26 times on a home over several years, erroneously lowering the home’s quality grade to generate a lower rebuild estimate. The policyholder ended up underinsured by $86,000, or nearly 25%.
And when a CSAA policyholder lost her home in a wildfire just four months after her agent set her policy limit with 360Value, the insurer’s own claims process found she was underinsured by 76%.
In response to these investigations, the insurers promised to pay back customers and make changes to their policies. But none discontinued their use of the tools. And despite recognizing the problem, California remained blind to its size. To this day, the state insurance department has not comprehensively studied how many homeowners are underinsured.
To gain a sense of the scale, it may want to look to Colorado.
After the 2021 Marshall Fire near Boulder, researchers at the University of Colorado at Boulder and the University of Wisconsin analyzed a dataset of nearly 5,000 homes that were destroyed or damaged.
The researchers compared homeowners’ coverage limits against rebuild estimates from a construction pricing database. They then adjusted those estimates upward to reflect actual rebuild costs gathered from homeowners. Three-quarters of policyholders in the sample were underinsured.
Hopkinson, the head of 360Value, called the Marshall Fire the “perfect storm” in her interview with the Chronicle. She blamed the widespread underinsurance on rising construction costs in 2020 and 2021 spurred by the COVID-19 pandemic, on top of demand surge .
But the researchers’ findings challenged this. Nine in 10 homeowners in their dataset had bought extended replacement coverage, which is designed to counter demand surge. Nonetheless, the vast majority of these homeowners were underinsured following the fire. And even in early 2021, before construction costs soared, the researchers found three-quarters of the homeowners had estimates that were too low to rebuild.
Tony Cookson, a co-author of the study, said his team looked into the role of 360Value and other algorithms in underinsurance, but didn’t explore it in depth.
“Basically, all these products produce numbers that are too low,” Cookson said. “There is a pretty systematic bias.”
‘Garbage in, garbage out’
Verisk Analytics, a $42 billion insurance data conglomerate based in New Jersey, introduced 360Value in 2007. It was a combination of two cost estimator algorithms that Verisk had purchased.
To gain a competitive edge against Marshall & Swift/Boeckh’s then-leading estimator, Verisk advertised the tool’s access to a massive database of “real-world claims,” which the company said would enable 360Value to “improve property valuation” across the industry.
The sales pitch worked. Farmers began using the tool to set policy limits in 2008. State Farm followed in 2010. 360Value was soon performing more than a million valuations a month. Today, Verisk advertises it as “the most widely used reconstruction cost estimator in the United States.”
It takes no specialized training to use 360Value, according to its training materials. Anyone can buy a subscription and log on through a web browser. At a minimum, users input three details to create an estimate: a home’s address, the year it was built and its square footage.
Verisk says 360Value can prefill data for every home in the U.S., using “advanced algorithms” to identify the most reliable information. When details are missing, like the number of stories or foundation type, Verisk uses “sophisticated modeling” to make an educated guess, drawing on information such as the home’s location.
360Value then breaks the home into components, prices them and adds them together. It taps a pricing database the company says relies on millions of claims that builders and adjusters submit. Verisk updates its reconstruction cost data monthly, tracking changes in the cost of paint, drywall, labor and more at a local level.
Once this process is complete, the homeowner walks away with a policy that is supposed to cover the cost of rebuilding their home exactly as it was, down to the last nail.
But in practice, the Chronicle found, 360Value regularly falters at one or more points. Many of its data sources have underlying problems. Agents are supposed to verify the prefilled details, Verisk training materials instruct. But few do this time-consuming work.
360Value’s prefill function vastly increases the number of estimates agents can run each day. However, those estimates are only as good as the data itself. When even one or two fields are incorrect, those errors can cause large fluctuations.
For example, if county assessor records are outdated and don’t account for a recent remodel, the tool will underestimate the reconstruction cost. Or if the algorithm guesses the house is one story when it’s actually two, the rest of its calculations will be off.
Publicly, Verisk promotes its prefill data as “reliable” and a means to help “insurers overcome the barriers to gathering accurate information.” Yet Verisk has never published an in-depth study on the reliability of its prefill or pricing data. The company told the Chronicle such studies exist, but refused to provide them, saying they are proprietary.
A 2019 memo that Verisk prepared for Farmers, reviewed by the Chronicle, detailed findings from its analysis of 360Value’s performance on nearly 213,000 destroyed homes across the U.S. and Canada.
Verisk had examined the accuracy of one prefill characteristic, foundation shape. For homes in the sample under 2,500 square feet, 360Value’s foundation shape information was wrong half of the time. The company acknowledged in the memo that agents rarely altered 360Value’s prefilled data.
In the same document, Verisk warned Farmers that its prefilled data produced “greater variance” for houses valued at $640,000 or more. That would include many homes in California: At the time, the average home in California was valued at over $540,000, according to Zillow.
Asked about this document, a Verisk spokesperson said that 360Value had since improved. She said that, because the report was from 2019 and part of a “client conversation,” it would be “misleading” to highlight in this story without more context. She did not provide additional context.
Kubo, the Bonny Doon homeowner, was given three rebuild estimates after he bought his home in 2016. At first, his State Farm agent recommended a policy with $475,000 in coverage for the family’s 2,500-square-foot home built in the 1970s — $190 per square foot.
An astrobiology researcher at NASA, Kubo was hardly an expert in building homes. But the number felt like “a joke,” he recalled. So he asked his agent to rerun the estimate. This time, the agent came back with $535,000.
The number still felt low to Kubo, who called his agent again: “Are you sure you don’t want to bring somebody out here to inspect the house?” he remembers asking. The agent declined, assuring him that the amount he’d quoted would be plenty, Kubo said.
“It was good to go over these items,” Kubo emailed the agent afterward, “and to be reassured that, for the most part, our coverages are adequate.”
They still weren’t. Not even close. While his agent had, in the intervening years, bumped up his limit to $640,000, his State Farm policy ultimately left him hundreds of thousands of dollars short.
The home the Kubos rebuilt isn’t identical to the one they lost. It’s slightly larger, but lacks the redwood beams that lined the ceilings of the 1970s Tudor and the stained glass windows that the fire melted into rainbow puddles.
To pay the construction costs his State Farm policy wouldn’t, Kubo said, he and his wife took out a million-dollar mortgage and drained their savings. Kubo, 48, believes they will be in debt until at least their 70s.
“We’re in for another 30 years of mortgage,” he said. “It’s going to set back our ability to retire. And we are the lucky ones.”
Kubo doesn’t recall receiving his 360Value estimate when he bought his policy, or even being told it existed. However, at the Chronicle’s request, Kubo obtained a copy of the 360Value report for his newly built home, generated by his current State Farm agent last July. The report estimated his replacement cost at $902,000 — over half a million dollars less than what he’d actually paid to build it.
Kubo found that this newer report was riddled with errors, including misstating the home’s square footage and fireplace type. Those matched the house that burned down.
State Farm did not answer specific questions about Kubo’s case. In a written statement, a spokesperson said, “State Farm agents can assist customers with estimating the replacement cost of their home when purchasing a policy” and during regular policy reviews.
State Farm also argued it does not set coverage limits in any of the homeowner policies it writes. “The coverage chosen is ultimately the customer's choice,” the company said.
But customers like Kubo face another complication. Even when 360Value’s prefill information is accurate, or corrected by an agent, the pricing data it taps is often skewed, meaning its estimates will still lowball the current construction rates, building contractors and public adjusters across the state told the Chronicle.
Matt Everson, a contractor in Sonoma County who helped families rebuild after the 2017 Tubbs Fire, said that when he creates his own rebuild estimates for clients, they are typically 30 to 50% higher than 360Value’s. The tool’s labor prices are well below California’s sky-high rates, Everson said.
Hopkinson, the 360Value head, said Verisk collects data from 50,000 providers of materials, equipment and labor, while surveying contractors across the country. It then combines that information with actual receipts from past claims.
“We’re trying to provide the most objective analysis of all these millions of data points that we look at on a monthly basis,” she said.
And yet, a provision buried in Verisk’s user licensing agreement makes clear the company does not guarantee reliable results.
“We do not warrant the accuracy of pricing information in the price data,” it cautions, advising that its data is intended “for informational purposes only” and that it should only be used as a “baseline or place to begin creation of an estimate.”
Insurance agents and industry representatives interviewed by the Chronicle said it’s true that homeowners can play a role in their own underinsurance. Many might choose a policy based on the lowest premium, without paying attention to the coverage limit, or not update their insurer about changes they make to their home.
But even if a customer is less knowledgeable about their home’s details, a diligent agent should be able to control for that by asking additional questions and making sure all of the information is accurate, Ruth Stroup, a retired Farmers agent, told the Chronicle.
"All these systems have a garbage in, garbage out component to them," Stroup said. “The more accurate the information, the better the estimate.”
Few homeowners knowingly underinsure themselves, Bach said. In fact, California insurance department reports show that, as of 2021, 90% of homeowners had paid for extended replacement cost coverage, the provision that provides extra coverage on top of policy limits.
“Why would you risk your largest asset for a couple hundred bucks?” Bach said. “You wouldn't.”
What Farmers knew
Some wildfire survivors go to court when they learn they’re underinsured, suing in a bid to be made whole. When they do, confidential settlements and court orders typically follow, keeping sensitive corporate documents out of sight. Home insurers have largely been able to conceal how they use 360Value.
But in one recent civil suit, Farmers missed a deadline to seal records. Thousands of pages quietly passed into the public record.
The documents provide a rare inside view of Farmers’ practices, showing the company knew for years that its use of 360Value led to underinsurance among wildfire victims and did little to fix the problem. Moreover, the company directed agents to use 360Value in ways that made estimates less accurate.
The case involved a couple who in November 2018 lost their home to the Woolsey Fire that tore through Agoura Hills, a tree-lined city bordering the Santa Monica Mountains in Los Angeles County. After filing a claim with Farmers, the couple realized their 360Value-generated policy fell short: It had estimated that their 1,000-square-foot home would cost $239,000 to rebuild, less than half of the $500,000 quoted by an independent expert.
The couple sued Farmers, seeking class-action status while accusing the company of deliberately underinsuring homes through “a systematic and pervasive ‘360Value scheme,’” according to court filings.
Farmers had started running 360Value estimates on policies for high-value homes in 2008, then expanded to “main street” homes in 2011. The company later shifted all of its existing homeowner’s policies to 360Value estimates.
According to the records that emerged in the Woolsey Fire case, it didn’t take long for Farmers to encounter problems. In 2015, Jon Vardaman, a member of the company’s risk management team, shared a worrying report with colleagues.
Vardaman’s team had noticed that 360Value’s reconstruction cost estimates were often significantly lower than quotes generated by another Verisk software program that Farmers’ adjusters used to estimate rebuild costs after a house had been destroyed. The tools drew from the same data and should have yielded nearly identical results. But that wasn’t happening.
A big part of the problem, Vardaman’s report found, was that Farmers agents relied almost entirely on prefilled data for 360Value. Nine characteristics had the greatest impact on a 360Value estimate’s accuracy, and Farmers used prefilled data for four of them: square footage, the year a home was built, the overall “quality grade” of the home and the percentage of the basement that was finished.
The problems went further. Vardaman’s team found instances in which agents had deliberately manipulated the tool to lower homes’ quality grades, which his colleague pointed out could be motivated by the “temptation … to service their customer with a price that may be too low.”
Farmers did not direct its agents to take greater care with their 360Value estimates. Instead, three months after Vardaman shared his report, the company dramatically increased its reliance on the faulty prefill data. Agents had been required to manually enter information about a home for 17 fields. Farmers cut it to two.
“This will significantly reduce the time it takes to create an estimate,” the insurer’s internal directive read. “You are still required to confirm the accuracy of prefill and assumptive data with the customer and when you inspect the home.”
As of 2022, Farmers agents were not generally required to conduct interior home inspections before issuing policies, and in most cases did not, records show.
Two years after Vardaman issued his report, in March 2017, his colleague, Michael Cleveland, emailed Verisk a list of Farmers policyholders whose homes had been destroyed.
“Claims believes all but one are underinsured,” Cleveland wrote, referring to Farmers’ claims team, a group of experts who assess damage. “What should (we) do to prevent the problem in the future?”
Inaccuracies continued to skew 360Value’s calculations, Cleveland wrote. Farmers and Verisk employees had identified multiple features that were “frequently incorrect” in the data, but that agents rarely checked.
Cleveland and Vardaman met with other Farmers employees to discuss their analysis. But in November 2017, one month after a wildfire burned entire neighborhoods in and around Santa Rosa, Vardaman and Cleveland emailed their team to say that the review — which they called the “360 total loss valuation project” — needed to stop.
“Mike advised that recently there was some class action litigation around this subject, so he felt it best not to continue the discussion,” Vardaman wrote. Cleveland added that customer complaints had “start(ed) coming in” via state regulators.
“We don’t want to do any independent reviews,” he wrote, “until further notice.”
The documents from the Woolsey Fire survivors’ case contained other revelations about Farmers’ practices. In depositions, employees confirmed they rarely, if ever, filled out 360Value comprehensively.
“To do the 360 to a T, you'd have to be on the phone with the insured for four hours,” said Ari Berman, the plaintiff’s insurance agent, in a deposition. “No one's going to sit on the phone that long to do a proposal with you.”
In fact, Farmers leadership long encouraged agents to rely almost entirely on unverified prefill data, records show, and continually simplified the tool to make estimates faster and easier to produce.
Soon after adopting 360Value for “main street” homes, Farmers hid 82 out of 100 data categories from agents when they ran estimates, leaving the agents unable to check those fields, employee depositions show. The company also “locked” certain values, including the year a home was built, forcing agents to issue policies based on data they knew was wrong but could not correct. No other insurer had locked fields before, according to Verisk.
Though Farmers knew its use of the tool was causing customers to be underinsured, the company did not disclose that to agents, court records show. Instead, it continued to seek ways to automate more of the estimation process — and Verisk helped.
In 2019, Hopkinson, the 360Value head, provided a memo to Farmers suggesting ways it could “increase the speed of calculating a replacement cost,” including by directing its agents to rely exclusively on prefilled data for middling-quality or “common” homes.
Such a change, she acknowledged, would have to include “an acceptance of a lower reliability of the replacement cost value.” The memo, also made public in the Woolsey Fire survivors’ lawsuit, continued: “Assuming a lower level of accuracy of the characteristics when not confirmed or corrected by homeowner information, Farmers can calculate using just an address.”
In March 2024, the lawsuit against Farmers was dismissed five months after a judge denied the attorneys’ request for class-action certification.
The judge ruled that because underinsurance is so specific to each person, and calculating rebuild costs so time-consuming and expensive, it would be unmanageable for the court to calculate the individual rebuild costs and damages for thousands of class members.
Farmers declined to answer questions from the Chronicle about the lawsuit.
‘We signed, and that was it’
Four years after Vardaman and Cleveland shut down Farmers’ 360Value investigation, two of their clients jolted awake. It was 10 p.m. on Aug. 16, 2021, and Linda and Richard Salazar’s landline in Grizzly Flats was ringing.
“What are you doing? You need to get out of there,” a friend said once they’d picked up. A dangerous forest fire was racing toward their house.
The couple fled, Linda driving their SUV and Richard their truck, their home of 20 years receding in the rearview mirror as ashes rained down. Sitting in the back seat of the SUV was the granddaughter they were raising, Anaya, while the few belongings they’d saved lay in the back of the pickup — family photos, keepsakes from Anaya’s childhood, crosses Linda Salazar had collected throughout her life.
They spent their first night parked outside a gas station. For the next five months, they lived in an in-law unit above a friend’s garage; Richard Salazar, then 77, slept in a recliner.
When the Salazars moved to Grizzly Flats two decades earlier, they thought they’d found heaven: a cozy cabin-style house with enough garage space for their motorcycles, a refuge from the chaos of their younger lives, and, later on, a quiet place to raise Anaya.
To protect their most important asset, the Salazars paid into two insurance policies every year — one from the California FAIR Plan, the insurer of last resort, which only covers damage from fire, and the other from Farmers to cover everything else, such as liability. Both policies were written by a local Farmers agent who recommended the coverage limits. Each year, the Salazars paid a little bit extra to Farmers for extended replacement cost coverage. The expense was a burden, but it felt worth it to be fully covered.
The Salazars don’t remember their agent ever mentioning an algorithm, or showing them an estimate — only that the agent asked a few basic questions about the home’s square footage and the year it was built.
“We are not knowledgeable in insurance or how policies should work,” Richard said. “We just wanted to make sure the house was insured. We put our confidence and faith in what the insurance agent told us. We agreed and we signed, and that was it.”
Until their home burned down. When their contractor’s estimate came back, the Salazars learned they were more than $200,000 short of what they needed to rebuild. Seeking to get more, they hired a public adjuster, who was unsuccessful — but took 10% of their payout.
Farmers declined to answer a list of detailed questions about the Salazars’ case.
“We do inform customers that we use an estimating program and advise customers to review and verify the estimate — including confirming the characteristics of their home,” the company said in a prepared statement. “In the end, it is customers who choose whether to accept or decline the offer of coverage.”
Over the past several years, home insurance in California has grown to be more expensive and harder to find than ever. The parts of the state suffering the most are those that have burned in past wildfires, such as Grizzly Flats and Bonny Doon — areas companies now say are too risky to insure.
When Bach, the United Policyholders executive director, used to give presentations to homeowners, she’d speak at length about how they could fight back against inadequate coverage. Now, she’s more focused on making sure people have any insurance at all. She’s heard stories from consumers who say they asked insurance companies for more coverage, only to be told no.
“The availability and affordability crisis have really distracted us from fighting to eradicate underinsurance,” she said.
In Bonny Doon, four years after flames consumed his neighborhood, Kubo is still underinsured. This time, it’s not for lack of knowledge.
To fully insure the home for the $1.4 million he spent building it would have cost $14,000 a year — more than he can afford. Instead, he settled for about $1 million in coverage, which brings his premium down to $10,500 a year for the FAIR Plan plus a State Farm policy to cover liability and other risks. Kubo wishes he could afford more coverage, but at this point, it’s simply too much for him and his wife as they juggle their new mortgage, raise their daughter and try to save for retirement.
He plans to rely on a desperate form of protection in the future: himself. If another fire comes, Kubo said, he will stay behind, guarding his home with a hose and sprinklers. Many of his neighbors plan to do the same.
“We can’t afford to have another loss like this,” he said.
Credits
Reporting by Susie Neilson and Megan Fan Munce. Visuals by Brontë Wittpenn. Visuals Editing by Nicole Fruge, Emily Jan and Maggie Beidelman. Editing by Ryan Gabrielson, Kate Galbraith and Demian Bulwa. Design and development by Erin Caughey. Design and development editing by Alex K. Fong. Graphics and animation by John Blanchard and Daymond Gascon. Data editing by Dan Kopf. Data and visualizations by Nami Sumida. Copy Editing by Linda Houser/Tafur. Audience by Jess Marmor Shaw.
December 18, 2025
By Susie Neilson and Megan Fan Munce
As flames incinerated whole blocks in Southern California, fierce winds pushed dark, speckled ash through Rossana Valverde’s door frames, windows and vents. Her home stood a short drive from the worst destruction caused by January’s Eaton Fire, but she had gotten lucky: Apart from a singed tree, her property appeared unscathed.
Yet the acrid stench in the bungalow she shared with her husband suggested otherwise. The remains of other people’s homes now permeated hers.
Valverde filed a claim with her insurer, State Farm General, and hired a contractor to write an estimate for the smoke damage to her Pasadena home, which overlooked Eaton Canyon near the border of the devastated community of Altadena. The document she received several weeks later listed the cleaning and repairs deemed necessary before she could return.
But as she read through it, she realized the document was not one State Farm had intended her to see.
Starting on the first page, someone working on behalf of State Farm had covered her contractor’s estimate with bright red text. “OS” was pasted on top of scores of line items, which meant “over scoped” — a charge State Farm didn’t intend to cover. “NW” indicated the work was “not warranted.”
Her original repair estimate, the one her contractor had written, totaled $69,000. The red markings spiked more than 150 line items her contractor had recommended — and sliced her estimated payout nearly in half.
These revisions would have left Valverde’s home still dusted with heavy metals and reeking of smoke, said restoration contractors who reviewed her marked-up estimate at the Chronicle’s request. Valverde said they made no logical sense.
“Am I reading it correctly?” she said she wondered. “They’re saying we’ll clean this wall, but not this wall, and they’re saying we’ll clean the top of the door and the door hardware, but not the door?”
The red text on Valverde’s estimate offered a peek into a hidden system that insurance companies use to reduce what they must spend to fix damage from disasters.
The promise behind home insurance is that, in the event of an accident or catastrophic event, policyholders will receive enough to get back into a home of similar kind and quality up to their policy limits. In California, policies must maintain standards of coverage and uniformity regulated by state authorities.
But unbeknownst to most homeowners, State Farm and other companies deploy powerful sets of cost-cutting instructions that betray this commitment, a Chronicle investigation found.
These restrictions are spelled out in a patchwork of documents that state regulators do not routinely examine. When homeowners subpoena these records in court, insurers generally file them under protective orders, keeping them concealed from the public by characterizing them as proprietary.
Reporters obtained hundreds of records outlining these behind-the-scenes rules for nearly every major insurance company in California, showing how they handle damage from wildfires as well as burst pipes and hailstorms.
The practices laid out in these documents — which are used in the vast majority of property insurance claims across the U.S. — have transformed how insurers treat policyholders after disasters, the Chronicle found, often turning the experience of filing a claim into an opaque and adversarial process that forces families to battle for months to get their losses fully covered, if they ever succeed.
State Farm and Farmers Insurance Group — the state’s two largest home insurers — declined to answer detailed written questions or comment on specific policyholders’ cases, saying each claim is evaluated on an individual basis. Liberty Mutual said it strives to pay claims accurately and quickly to take care of its policyholders.
“Every claim is carefully reviewed based on the policy, the facts, and the damages involved,” State Farm spokesperson Sevag Sarkissian wrote in an email. “We also ask our service providers to act quickly so customers can recover as soon as possible.”
Together, the Eaton and Palisades wildfires in Los Angeles County were the costliest in recorded history, causing an estimated $40 billion in losses while killing 31 people and destroying more than 16,000 homes and other structures. Claims filed for “total losses” usually trigger a large payout at or near the policyholder’s coverage limit.
But this tally only counts damage from flames and heat, not from smoke. Thousands of homes still standing in the burn zone were likely contaminated by lead, asbestos and other chemicals from soot and ash.
It’s these homes that have been subjected most intensely to insurers’ in-house claims-editing rules, experts said, because their damage is less obvious. Repairs become subject to debate and interpretation as insurers seek to lower their costs across thousands of smaller claims.
In a September survey commissioned by the Department of Angels, a fire survivor advocacy group, more than a third of Los Angeles County survivors with smoke-damaged homes said their insurer had given them a payout estimate that they understood to be “far below the actual cost” of repair or rebuilding. The vast majority said they faced challenges getting claims paid.
Filing an insurance claim is a complex process, involving many steps that homeowners don’t see. Insurers enforce their rules at every stage.
First, they assign the claim to an adjuster — an individual who manages claims on behalf of an insurance company, making decisions about what is covered and how much to pay according to the firm’s internal rules. Often, they recommend a contractor who is contractually bound to follow sets of insurers’ directions when writing repair estimates. Then, they run those estimates through another layer of review that effectively minimizes what insurers pay.
The documents reviewed by the Chronicle include company-wide claims manuals , adjuster training materials and slideshows, and agreements between construction firms and insurers. Reporters also reviewed internal communications showing how insurance reviewers cited internal instructions to shrink homeowners’ payouts.
Among this investigation’s findings:
- Insurers aggressively limit the damage they will cover, making small cuts that add up to big losses for homeowners: For instance, insurers often only allow contractors to apply one coat of paint to a wall when the industry standard is two. Such provisions can collectively slice claims by a quarter or more, adjusters and contractors said.
- Speed trumps accuracy: The directions often force adjusters and contractors to write estimates on short deadlines, yielding shallow investigations. If a claim estimate is too high, adjusters must bring in a manager, pushing them to offer low settlements to keep things moving.
- Insurers limit communication with policyholders, minimizing or avoiding paper trails: A claims manual from State Farm specifically instructs adjusters to communicate denials verbally, not in writing. Current and former adjusters told the Chronicle other major insurers follow the same playbook.
- Estimates are based on bottom-barrel pricing data: Contractors say the most popular software for estimating claims costs, called Xactimate, routinely produces prices that are below the real-world costs. The tool’s creator acknowledges that its data should be used as an opening bid, not a final offer. But several major insurers forbid contractors and adjusters from deviating from its estimates.
- The system places pressure on contractors to cut corners — or lose money on jobs: At least nine insurers had rules restricting contractors from including money for overhead and profit when writing estimates for certain jobs. These instructions often bar them from charging for protective equipment that restoration contractors are required to provide employees, such as gloves, hazmat suits and masks; for the hours they spend supervising jobs; and for items deemed “tools of the trade,” like sheeting and painter’s tape.
- These documents are excluded from routine government oversight: California’s Department of Insurance reviews and approves all insurance policies, but lacks authority to request internal claims-handling documents unless it has already initiated a special investigation into a company. Regulators thus cannot proactively check whether insurers’ claims practices comply with state insurance regulations, industry experts told the Chronicle.
To be sure, some restrictions by insurers are necessary and useful for homeowners — including rules that ban use of pressure tactics to win homeowners’ business. It’s not uncommon for contractors to pad estimates to try to make more money on claims, and some unscrupulous contractors see opportunity in disaster. Such practices, if not controlled, could lead to ballooning premiums for homeowners across the country.
Steven Badger, a Dallas-based partner at Zelle LLP who represents insurance companies in litigation, said that insurance companies want to make homeowners whole “as quickly as possible.” To that end, the rule books work like guardrails, ultimately protecting policyholders from excessive charges.
This is especially true for smoke-damage claims, Badger said. Both courts and scientists are divided on exactly how wildfire smoke and debris impacts a home and how much insurance companies are responsible for it. If costs go too high, Badger said, insurers could stop writing new policies or seek to remove smoke damage from Californians’ coverage altogether.
“We have people testing the boundaries of what’s covered in these matters, not always squarely for the benefit of the insured,” he said, “but often so they can make profits off the claim process themselves.”
Still, more than three dozen current and former insurance adjusters, policyholder advocates and contractors told the Chronicle that insurers aren’t just using the rule books to prevent fraud. They’re slashing legitimate costs from claims and leaving homeowners with estimates that are tens of thousands of dollars lower than the fair market rate for their repairs. In some cases, contractors have outright refused to do the work for the prices insurers claim are fair and reasonable.
“They say that they’re there to catch mistakes. That’s all fine and good,” said Paul Willett, an adjuster who used to work on behalf of insurers and now represents homeowners in insurance disputes. “But these guys are cutting down estimates and doing it remotely, without ever setting foot on the property.”
Although internal claims rule books have existed for years, they have remained largely unavailable to lawmakers and the public. Homeowners aren’t told when an adjuster is using a particular set of instructions to cut their estimate and, short of obtaining inside information, it can be exceedingly difficult to determine if and how exactly internal rules were used. One insurer’s guideline instructs adjusters not to mention the documents to homeowners at all.
“Do not engage in practices that potentially create a conflict of interest between the claimant and HGI,” instructed adjuster guidelines for Homesite Group Inc., a subsidiary of the 10th-largest insurer in California. “Example: ‘I would have paid you for the roof, but Homesite has guidelines that prevent me from doing this.’”
American Family Insurance, Homesite’s parent company, did not respond to questions about the document and whether it was still in use.
Insurance companies have allegedly punished adjusters who spoke out about the playbooks and practices associated with them. In May, a former adjuster who had done work for Allstate told Congress that the insurer stopped sending him jobs after he agreed to testify about his estimates being altered downward without his consent. A State Farm whistleblower submitted anonymous written testimony citing the same concerns. Allstate told the Chronicle it denies the adjuster’s allegations; a State Farm spokesperson responded by saying, “Our commitment is to maintain the highest standards in customer service, and we welcome all feedback.”
In April, a Florida insurer sued a former adjuster for libel after he told “60 Minutes” that the vast majority of his estimates had been edited down by the carrier, Heritage Insurance. Heritage claimed the adjuster had deliberately inflated his damage estimates in order to earn higher commissions on them. The adjuster filed a counterclaim in response, alleging Heritage’s guidelines were designed to help the insurer underpay policyholders. The case is ongoing.
Of the four dozen current and former adjusters and contractors who spoke to the Chronicle for this story, nearly two-thirds requested anonymity, citing fears of being blackballed in their industries if they shared their experiences working for insurers. Some were allowed to withhold their names under the newspaper’s confidential sources policy.
Reporters also spoke with more than three dozen homeowners in Los Angeles, many with young children, whose homes remained intact after the fires but were left contaminated with toxic debris.
These families said they had grappled for months with an impossible choice: Either keep fighting their insurance companies, a process requiring hours of work each day and potentially tens of thousands of their own dollars; pay for needed repairs themselves, spending upward of $100,000 in some cases; or give up — and move back into buildings that lab tests show are laced with lead, asbestos and other harmful substances.
They said insurance companies ignored government directives and doctors’ recommendations advising them to test for and clean homes of lead, drastically underestimated the cost of their repairs, and delayed one step of their recovery after another.
Some families said they moved home after inadequate cleanings, only to realize over the summer, when the heat pulled the stench of smoke and tiny suspended chemical particles back out of the walls, that their homes were still contaminated, sending them back into battles with their insurers.
‘If you want the work, you gotta play ball’
California has some of the nation’s strongest laws protecting insurance policyholders from receiving repair and reconstruction estimates that are “unreasonably low.”
Homeowners are entitled to pick their own contractors. If a homeowner says the insurance company’s estimate is too low based on their independent contractor’s bid, the insurer has three options under the law: It can pay the independent contractor’s full estimate; it can, at the homeowner’s request, recommend a contractor who can repair the home to its condition before it was damaged for the price the insurer wants to pay; or it can “reasonably adjust” the independent contractor’s estimate.
In practice, these laws have gaping loopholes, the Chronicle found.
Terms used in state law such as “unreasonably low” and “reasonably adjust” are subjective. Unless a homeowner sues or demands a formal negotiation process called an appraisal, the party who decides what is reasonable is the insurer.
Even the promise of “repair” can be tricky for policyholders to nail down, especially when one particularly serious form of damage to their homes — chemical contamination — is invisible to the eye. No state has established standards for what constitutes thorough repair of a smoke-damaged home.
This lack of clarity means that insurance company adjusters can edit claims significantly downward and say their edits are “reasonable,” even if a homeowner disagrees, restoration contractors and policyholder advocates told the Chronicle.
Additionally, while homeowners are technically allowed to hire a contractor of their choosing, their insurer can legally reject the estimate — as long as it can find another contractor to offer a lower bid for the same job.
Insurance companies have built rosters of contractors willing to offer lower bids, the Chronicle found. These “preferred vendor” networks typically send jobs to member contractors and restoration companies — which clean and repair homes damaged by fire, water and mold. Insurance companies say their vendor networks are more efficient and cost-effective for homeowners, and provide a steady stream of guaranteed work to member contractors. But these vendors must agree to submit estimates that follow strict carrier guidelines.
“We are Farmers Eyes and Ears on the job site,” instructs a set of 2021 guidelines for a Farmers preferred vendor network.
Yet insurers often describe these vendors as “independent contractors,” rarely telling homeowners they have agreed to adhere to the insurer’s demands in exchange for customer referrals, public adjusters and advocates told the Chronicle.
Some companies, including State Farm, have created what they call “estimate-only” programs. In these initiatives, insurers hire contractors to create a quote for a job, with no requirement that the contractors take on the work themselves, records show.
In practice, more than a half dozen adjusters and contractors said, vendors on “estimate-only” programs end up creating low-cost estimates insurers can use to undercut independent contractors’ bids.
Some insurers take steps to hide these estimates from homeowners. “Do not provide the insured the Estimate,” instructs a vendor for State Farm in one 2025 guideline for its “estimate-only” program.
State Farm’s written response to the Chronicle did not address whether it withholds particular documents from policyholders.
Because restoration work is more sporadic and emergency-driven than, say, a kitchen or bathroom remodel, many businesses in the industry rely on referrals from insurers. That means insurance companies have outsize control over which firms can get hired — and many of the restorers that operate independently struggle to stay in business, contractors said in interviews.
“If you want the work, you gotta play ball,” said a member of a State Farm preferred vendor network, who requested anonymity because he feared retaliation from the insurer. “If you don’t play ball, you’re not gonna get jobs. You have to write (the estimate) the way they want you to write it.”
And while preferred vendors comprise a minority of the market, insurance companies regularly apply restrictions in guidelines for independent contractors’ estimates, too, claims records reviewed by the Chronicle show.
Valverde got to see firsthand how insurance adjusters and vendors used carrier guidelines and other hidden rule books to trim down estimates across multiple phases of her claim, starting when State Farm’s marked-up estimate arrived in February.
Several of her neighbors were already moving back into their homes, accepting what their insurers were willing to cover to get back to their lives. But Valverde hesitated. A 69-year-old grandmother with a compromised immune system, she remembers what happened after another wildfire nearby.
In 1993, the Kinneloa Fire burned through Eaton Canyon just behind the same house, which she then shared with her first husband, Fred Lapsys, blowing ash and soot inside.
“We moved back in the next day. We cleaned it all up ourselves with our little mops and brooms. And five years later, my husband was dead,” she said.
Valverde still isn’t sure if the lingering soot and ash contributed to the pancreatic cancer that killed her husband. But she didn’t want to take any chances. Her current husband, Sam Strgacich, said his throat felt scratchy when he spent more than 10 minutes inside the house, with its gray haze and bitter smell. Strgacich already had health concerns, including a prostate cancer diagnosis three years earlier that required surgery.
So Valverde pushed back. When State Farm refused to pay to test her home for contaminants, she paid nearly $6,400 out of pocket to hire testing firm Titan Environmental Solutions. The results, which came back in late March, found elevated levels of lead, nickel and arsenic across her home. Valverde is allergic to nickel; if she spent any prolonged amount of time in the home, she said, her skin would redden and itch.
Her contractor wrote up an estimate that accounted for costly work to remove microscopic lead particles that had sunk into her drywall and the grooves of her hardwood floor. The new list of necessary repairs totaled more than $120,000.
Instead of accepting the bid, State Farm said it wanted to send a different contractor, one in its preferred vendor network, to write a new estimate for her home. Valverde refused.
So instead, in July, the insurer again edited down her contractor’s list of necessary repairs. State Farm’s updated estimate removed nearly half of her independent firm’s bid, agreeing to cover just over $70,000.
Sarkissian, the State Farm spokesperson, declined to comment on specifics about Valverde’s estimates or her claim, but said the company was “always ready to review any new information” if a policyholder disagreed with its decisions. A Chronicle review of her original estimate, alongside State Farm’s revised version, found many cuts resembled restrictions in the State Farm carrier guidelines that reporters obtained.
Gone were the charges to remove her carpets, along with the cost of tape to protect her floors and ceilings and fresh paint to coat her walls — which industrial hygienists recommend to seal off toxic substances so they don’t seep back into the indoor air. The insurer again deleted charges to clean the cabinets, walls and doors.
Valverde said her biggest concern was the possibility that lingering contamination could sicken her family, especially her young grandchildren.
“That’s what we’re fighting about,” she said. “We’re not fighting about getting new carpets and drapes and furniture.”
Valverde asked Andrew Whelton, an environmental engineering professor at Purdue University who has reviewed over 500 Los Angeles fire survivors’ testing reports without pay, if the procedures outlined in State Farm’s revised estimate would adequately protect her and her husband from heavy metals. His answer: They wouldn’t. She told this to State Farm, which still declined to pay.
But in November, the insurer changed its stance. That month, the Los Angeles County Counsel’s office launched an investigation into State Farm’s claims-handling practices, specifically calling out allegations that the insurer refused to pay reasonable smoke damage claims and withheld key documents from homeowners.
The week after the investigation was announced, a new adjuster called Valverde to let her know that a new check was on the way, bringing her total payout to restore her house up to $127,000.
Valverde is still waiting on payments to replace her HVAC system. State Farm is also still disputing charges to paint her home’s walls. But it was enough to get started. In December, her contractor finally began work on the estimate he’d written eight months earlier.
One cloudy morning in late September, while reporters visited Valverde and Strgacich, they greeted a neighbor as he walked his dog down the cul-de-sac.
“Hey, guys. All cleaned up?” the neighbor asked.
Valverde shook her head. “Nothing’s been touched. Insurance has not paid us.”
“That’s a shame,” he replied. His insurer, he said, had approved his home cleaning “right away.”
Valverde explained the testing she’d paid for, the heavy metal contamination it found and the ongoing dispute with State Farm.
The neighbor laughed nervously.
“We didn’t have ours tested,” he said. “I wonder how bad ours is.”
Wishful pricing
In addition to controlling the extent of repairs and cleaning, insurers use internal rules to limit the prices for these jobs — often setting rates below what the materials and labor cost on the open market, previous reporting by the Chronicle and nonprofit research has shown.
Many guidelines require that vendors use Xactimate , which writes estimates and is ubiquitous among insurers. The program regularly updates prices for tens of thousands of line items that might come up on a rebuild or repair job.
But Xactimate’s data routinely underestimates construction costs, particularly for labor, the Chronicle found.
Verisk, the company that owns Xactimate, told the Chronicle that its tool incorporates “millions of data points from restoration contractors, adjusters, materials and equipment suppliers, independent research, and more” to determine its prices.
Yet it has also publicly said that it cannot guarantee its pricing data is accurate. Since at least 2020, its licensing agreement has said its data reflects a “baseline,” not a ceiling, barring its clients from forcing their adjusters and contractors to use only its pricing data when writing estimates. A Verisk spokesperson confirmed that its prices are intended to be a “flexible reference point” and that “prohibiting or precluding deviations from the price data” would violate its contracts.
Regardless, in at least a dozen recent guidelines the Chronicle reviewed, insurers did exactly that, requiring vendors to use Xactimate prices exclusively in their estimates.
“It really doesn’t fit in with the way in which the application was intended to be used,” Mike Fulton, a former executive overseeing Xactimate, said at the annual conference of the Restoration Industry Association in 2020. “The accurate or the right price is not something that’s global in nature. It’s really specific to the job.”
As claims flooded in from Los Angeles fire survivors, insurers began allowing vendors to veer from Xactimate’s numbers — so long as those prices were lower, according to insurer communications and homeowners’ estimates obtained by the Chronicle.
In January, Joseph, an estimate writer for a remediation firm who asked to be identified by a pseudonym, received an email from Lionsbridge, a preferred contractor network that works with major insurers, including Farmers.
“We are pleased to announce that Lionsbridge has entered into an agreement to provide a structured smoke and fire mitigation program with several top carriers,” the email read. “To simplify the estimate process for the carriers, we have agreed to use per square ft pricing for high volume wildfire claims.”
The email told contractors they could charge four “levels” of pricing on their estimates based on the amount of ash and debris in each home. The email said nothing about what to do if homes tested positive for lead or other toxic substances. Lionsbridge did not respond to a request for comment.
Joseph said he could immediately tell that the numbers quoted in the price schedule were far too low to decontaminate a smoke-damaged home, starting at $2.75 a square foot for a “level 1” cleaning of a structure with no clothes or furniture in place. The true costs required to complete these jobs could be twice as high as the listed prices, he said.
His company still joined on, he said, because it needed the work. As he predicted, contractors struggled to adequately fix homes for the Lionsbridge prices. Frequently, the company had to send homeowners estimates that had been cut down by “estimate reviewers” — people hired by insurers to revise adjusters’ and contractors’ claims estimates to ensure they comply with their internal rules.
“It definitely did lead to lowballing,” Joseph told the Chronicle.
In a few cases, he said, employees went ahead and performed the work they knew was necessary, at the company’s expense.
Insurers’ use of square-footage pricing to limit smoke damage payouts was not uncommon, records obtained by the Chronicle show. A separate vendor program for Farmers required its members to follow the same model, and Mercury Insurance’s wildfire smoke damage program instructed vendors to charge rates starting at $3 a square foot, even lower rates than Farmers.
Ryan Grattan, a divisional claims manager at Mercury who helped oversee the insurer’s Los Angeles wildfire response, said square footage pricing was only one of the tools it used to determine smoke payouts. If heavy metal tests found contamination, he said, Mercury would increase its payout to decontaminate those homes.
Chris Mooney, a former independent insurance adjuster, said he saw estimates written with this pricing method prevent many homes from being cleaned effectively following fires. Mooney now works at Tugboat, a company that has helped over 600 fire survivors in Los Angeles, mostly pro bono, to negotiate with their insurers.
“They’ll pay less and do way less work and say that it’s done,” Mooney said. “They’ll go in and say it’s clean, but lead is showing up everywhere.”
Don’t look for damage
Before writing their estimates, adjusters and contractors must first inspect homes to determine the source and extent of damage.
These investigations are supposed to be thorough. Yet many insurance companies have set rules that limit the scope of damage inspections, minimizing what inspectors might find, and therefore what insurance will cover on a claim.
It can take days to put together a detailed estimate for a complex claim, current and former adjusters and contractors told the Chronicle. Yet guidelines for more than a half dozen insurance companies — including State Farm, Farmers and Liberty Mutual — have directed adjusters and contractors to turn in estimates within one or two days of their initial inspections, which contractors said requires them to sacrifice accuracy for speed.
Two former adjusters who worked for major insurers told the Chronicle that they were instructed to write repair estimates immediately after their first inspections while sitting in their cars, then cut the homeowners a check on-site.
“I’d estimate it in the car and then walk back to the door and knock on the door and be like, ‘All right, you got $10,000 here, buddy,’” said Mooney, an independent adjuster who used to work for insurers including Liberty Mutual.
The homeowner would often gladly accept the quick payout before realizing, after contractors discovered more damage, that it wasn’t enough, he said.
A spokesperson for Liberty Mutual said that one of its third-party adjusters was responsible for the estimate deadline referenced by the Chronicle and that the company has only required its adjusters to submit estimates within 24 hours when such a timeline was "feasible," such as during water-damage claims. The insurer added that Los Angeles wildfire claims were exempted from such a deadline.
The Liberty Mutual spokesperson said that “prompt initial payments to our customers are crucial in their recovery, providing peace of mind and allowing them to begin repairs or replacements as quickly as possible.”
If additional damage surfaces after an initial inspection, contractors typically have to write what’s known as a “supplemental estimate” to get the damage covered. Insurance companies’ carrier guidelines generally give them the right to refuse to cover supplements, and the process can draw out repairs by months, adjusters and contractors told the Chronicle. (A Farmers spokesperson told the Chronicle that “as customers provide additional details about a loss, we review the new information and can provide supplemental payments, as appropriate.”)
Other seemingly innocuous provisions in claims instruction manuals can become daunting barriers.
Guidelines often require that contractors provide photo documentation of all damage. But the Chronicle reviewed email chains in which insurance claims reviewers cited these requirements to deny charges for important supplies, like respirator cartridges to protect workers, because the contractor did not provide a picture of the items with the estimate.
When contractors submit photos as directed, some employees working for insurers scrutinize the images for ways to deny or reduce coverage.
On the day the Eaton and Palisades fires ignited, the Santa Ana winds gusted so fiercely across Southern California that they ripped the roof off a homeowner’s detached garage. The roof flipped in the air and crashed back onto the main house with such force that it broke solar panels and sheared off shingles.
The damage went far deeper: The garage roof’s impact also fractured the main roof’s eaves, the edges that hang over a home’s outer walls, and left long, thin cracks across the ceiling, photos and damage records show. Most glaringly, it tore a hole into the roof that penetrated through the ceiling.
The homeowner, who asked not to be identified publicly, filed a claim with State Farm.
The estimate writer for the remediation company that handled the homeowner’s claim said that when he first saw the drone photos the homeowner had taken, he immediately sent them to his colleagues.
“It was a first for me,” said the employee, who also spoke on condition of anonymity, saying he feared retribution from State Farm.
He wrote a $43,000 estimate, which included thorough repairs to the main home’s roof. To anticipate the insurer’s argument that the roof wasn’t severely damaged, he said, he submitted detailed photos showing what lurked beneath the shingles: the ceiling cracks, the broken eaves.
State Farm’s contracted reviewers challenged the repairs nonetheless, claiming the photos showed little damage, the Chronicle found.
The estimate writer’s company asked the reviewer to look at the photos again, emphasizing that the entire garage roof had landed on the roof of the main house. The reviewer still claimed the roof under the panels was undamaged.
The State Farm reviewer, who worked for a third-party firm, also asked the estimate writer to remove what he had deemed necessary electrical work for the garage, along with charges for the plywood his colleagues required to construct a new garage roof. By then, he said the garage roof had fallen off the main roof into a splintered pile next to the house and was not visible in many of the photos he submitted.
The remediation company employee wrote an estimate for $29,000 — an amount he said he knew would be inadequate. He told the homeowner his company couldn’t fix both roofs for that price.
“We just kinda gave in, in order to satisfy program guidelines,” the estimate reviewer said. Whenever he and his colleagues push back, he said, “we get penalized. They start threatening us. And we don’t want that, because it means no jobs.”
The homeowner said State Farm’s estimate was not high enough to fix his garage, let alone the main house. Meanwhile, rain fell through the hole in his home’s ceiling and into his roofless garage, causing more damage. When the homeowner complained to State Farm, he said, the insurer told him that it wouldn’t cover any water damage, because he had taken it upon himself to try to patch up the leaks.
Finally, the homeowner said he threatened to sue, and the insurer increased his payout by tens of thousands of dollars.
‘Smile and dial’
When Chad Peters first reentered his acid-smelling, hazy house in Malibu just weeks after the Palisades Fire, he spent almost two hours photographing the damage in full protective gear — a Tyvek suit, gloves, booties and an N95 mask.
The next morning, he said, “My throat burned, I felt sick to my stomach, my body ached. That’s when I realized, ‘Oh, something is very wrong.’”
Peters hired a testing company, which took six lead samples throughout the house. All but one came back above the EPA’s clearance levels for lead on floors and windowsills. Two were 34 times the limit. Tests for asbestos found the carcinogen in his attic and his 7-year-old son’s bedroom.
But when Peters asked State Farm to cover his testing and remediation plans, the company’s adjuster refused, claiming his policy didn’t cover testing. While there’s no law explicitly requiring insurers to test homes, California Insurance Code mandates that insurance companies conduct a “thorough, fair and objective investigation” into every claim, which the California Department of Insurance has since interpreted to mean insurance companies should pay for testing if it is “warranted.”
Peters asked for the denial of his remediation plan in writing, and the adjuster said no again, claiming she hadn’t officially denied it.
“What I said is, I can’t do anything with it at this time,” she said on a recorded phone call.
Peters’ experience mirrors instructions in one of State Farm’s Operations Guides, a set of guidelines the company created for its adjusters.
“In jurisdictions where the law does not require written follow up to the denial of a claim, our position should be verbally communicated to the policyholder,” the guideline from 2018 states. While adjusters should give “consideration ... to communicating our position in writing,” it adds that the adjuster should first figure out whether the policyholder “agrees” with the denial or wants to fight it.
A former independent adjuster who worked for State Farm through a third-party adjusting company, and who requested anonymity, said her managers recommended she avoid written communication, especially after large disasters.
“They used to say, ‘Smile and dial,’” she said. “Every manager I ever had.”
She said the company’s emphasis on verbal communication over detailed written updates allowed it to satisfy state regulations mandating regular communication with policyholders while drawing out the settlement process. California regulations require insurers to message policyholders about their unresolved claims every 30 days. The approach, she said, also allowed her and other adjusters to reduce their paper trails, giving them more flexibility to rescind an offer if the insurer wanted to later.
“It allowed us to punt the next meaningful communication,” she said, adding: “It always felt so icky to me.”
Guidelines for at least a half-dozen third-party adjusting companies and insurers, including State Farm and Farmers, restrict communications between contractors, adjusters and homeowners. Others instruct adjusters and contractors to use language that can obfuscate the sources of damage.
“Do NOT use the words Wind or Hail in reports or on photos. Use the words creased or missing for wind and use mark, impact or denting for hail,” instructs a guideline from Capitol Preferred, a since-shuttered Florida-based insurer.
In California, the law is clear: Insurers are required to put denials of claims in writing. They’re also required to provide homeowners with all “claims-related documents,” including estimates, upon request, with few exceptions. But State Farm’s adjusters have repeatedly avoided communicating key facts in writing since the fires began, multiple public adjusters, attorneys and homeowners told the Chronicle.
Sarkissian, the State Farm spokesperson, said the company communicates in the way each customer prefers, whether it be “by phone, email or letter.”
“If a claim must be denied, we do so quickly and respectfully, following state rules,” he added.
Nearly a year after the fire, Peters’ house is still full of ash. He has been assigned six different adjusters. The first estimate State Farm sent him for his repairs in May came out to $68,000 — less than 6% of the $1.2 million bid his independent contractor sent him.
In the seven months since then, State Farm has upped its own estimate to about $430,000, still more than half a million dollars short of what his contractor says he needs. In December, his agent informed him that State Farm would be dropping coverage on the house. Peters said he lies awake at night, dreading the possibility that he’ll have to deplete his savings to make the house safe for his wife and sons.
Peters recalled that on the day of the fire, after he had evacuated with his family, he battled his way back to his house to grab some belongings, flames already spreading across the road. As he fled with his wife’s wedding ring and a few computers, he thought he would never see his home again.
“I ask myself, could I deal with the day of the fire 10 times over if I didn’t have to deal with insurance?” Peters said. “I’d probably take that.”
A blind spot for rule-setters
Even more than homeowners insurance policies, insurance companies’ internal claims-handling rule books “were the source of truth for how we estimated claims,” said Cameron Mooney, Chris Mooney’s brother and co-founder of Tugboat, of his time working as an insurance adjuster.
State law requires traditional insurance companies like State Farm, Farmers and AAA to submit their policies to the California Department of Insurance for approval before they sell them to homeowners. This step protects homeowners from arbitrary changes to what their policies cover. Yet documents outlining insurers’ claims practices are not subject to any routine review, said Tony Cignarale, deputy commissioner of the department’s Consumer Services and Market Conduct Branch.
“There’s no statutes in place that dictate the form, content, preapproval, in any respect,” of documents outlining insurers’ claims-handling practices such as adjuster manuals and preferred vendor contracts, Cignarale said.
The only time the department might see claims-handling documents is when it initiates an investigation — either through a consumer complaint or a formal process known as a market conduct examination, Cignarale said.
In the past 10 years, the department has conducted more than 650 public examinations of home, auto and life insurance companies. This summer, it brought legal action against the California FAIR Plan after a market conduct examination revealed the insurer was denying coverage for smoke claims, contrary to state law.
The department looks into whether an insurer’s practices align with California’s Fair Claims Settlement Regulation — a law that explains what insurance companies must do to fairly investigate and pay out claims.
Regulators have authority to fine insurers for violations or to initiate legal action if they find evidence of repeated or deliberate illegal behavior. Deputy Insurance Commissioner Michael Soller said the department pursues all allegations of underpayment. Its investigations following the Palisades and Eaton fires have recovered $158 million in additional payments to policyholders, he said.
In June, the department launched a market conduct examination into State Farm’s handling of Los Angeles wildfire claims. It has also issued bulletins and notices to insurers reminding them of their legal obligations to fairly investigate smoke-damage claims and provide policyholders with a copy of every estimate made for their house.
“We are taking action so people are not left in the dark without documents from their insurance company including all estimates related to rebuilding and recovery,” Soller said. “Having all the information about your claim is not a luxury — it’s the law. And when we find ways where the law falls short, we work with the Legislature to close gaps so people can recover fairly, fully and quickly.”
Stephanie Wilcox reads everything the state agency sends out, then forwards it to her insurance company, Farmers.
Wilcox’s Pasadena home is a short walk from the burn zone, which is now a swath of cleared lots. In late January, only weeks after the fires, a Farmers adjuster inspected her home and documented ash throughout, she said.
So she was startled when the same adjuster soon began pressuring her and her husband to move back into the home with their toddler, arguing it was livable because utilities had been restored.
“When I completed my inspection, I found no actual fire damage to your property,” the adjuster wrote in an email.
Her house needed a “level one” cleaning for light soot and ash contamination, costing $4 per square foot, according to the estimate she received. The adjuster told her the rancid smell of smoke permeating the building would dissipate with time. There was no mention of testing the home for toxic substances. Her estimate totaled $15,100, which included several items such as laundering her clothes.
Farmers gave Wilcox’s family two days to return to their uncleaned house, and then stopped paying for their temporary rental home.
Wilcox sent Farmers a regulatory notice advising insurers that working utilities alone did not make a home livable, and a bulletin instructing companies to pay for homeowners’ testing.
She also sent a barrage of local news articles about lead and asbestos being found in the air and debris in Los Angeles County. She attached a letter from her daughter’s pediatrician advising that the family not move back until the home was certified to be free of lead — a heavy metal that can severely impact child brain development even at low concentrations.
Farmers refused to budge.
“Your homeowner’s policy does not provide coverage for your personal health,” the adjuster replied. “You may choose to hire a hygienist at your own expense.”
Wilcox felt certain that moving home would expose her then-2-year-old daughter to lead and other toxic chemicals.
She sent Farmers four estimates from contractors, who had determined it would cost between $40,000 and $60,000 to test and clean her house, and asked Farmers to approve payment for the lowest one.
Farmers rejected the independent estimates, saying they included “unnecessary and unwarranted items.” When Wilcox asked the adjuster to explain what was wrong with the estimates, the adjuster responded without acknowledging the question. The insurer sent out a preferred vendor, American Disaster Cleaning Group, to write her a new estimate that came in at $21,400.
By the end of March, Wilcox and her husband had been paying for everything out of pocket for two months and were running out of money.
They saw no choice but to move back into their still-contaminated home. They decided to trash most of their belongings, even if Farmers would not agree to replace those items.
Wilcox’s husband bought lead swabs off Amazon to test which furniture could stay and which had to be thrown out. Yellow meant safe. Red meant lead.
The first swab they used turned dark red, she said.
Her fears growing, Wilcox paid for a professional testing company, which in April confirmed what she and her husband had found with their over-the-counter swabs: Six of seven samples from their property had reportable levels of lead. Four were above what the EPA allows.
Wilcox threw out her couch and mattress. She and her husband packed their clothes into plastic bags to be shipped off and cleaned, and they moved other belongings — their daughter’s play table, her stuffed animals — outside to be discarded. They took down her sooty swing from the front yard.
Remediation technicians cleaned what they could for Farmers’ price, replacing the soiled insulation in the attic, cleaning the HVAC unit and intensively wiping down surfaces in one room so the family could store some belongings there. But a follow-up test of Wilcox’s home paid for by Farmers still found lead on her floors and windowsills, even where they’d been cleaned.
Finally, after the Wilcoxes had spent months of effort and thousands of dollars to get their lead acknowledged by Farmers, the insurer agreed to approve around $65,000 for restoration companies to use specialized wipes and HEPA vacuums to clean the lead from their home. The company also agreed to pay the back rent for the months that the family had remained out of their home.
But as of December, it continued to deny payment to replace her soft goods — including blankets, clothes and mattresses — insisting they can be cleaned despite evidence suggesting lead can irreversibly contaminate these items and expose children to further harm.
A Farmers spokesperson told the Chronicle that it cannot comment on individual customers, but that it reviews all claims individually and works with policyholders to resolve them.
“As customers provide additional details about a loss, we review the new information and can provide supplemental payments, as appropriate, taking into account the circumstances of the loss and the terms of the policy,” the spokesperson said.
Nearly a year after the fire, Wilcox’s house is still empty and ash-strewn. Half of her family’s belongings are piled up in garbage bags outside the house waiting to be cleaned or discarded.
She’s marked major milestones in family members’ guest rooms, hotels and Airbnb rentals: her daughter’s third birthday, the six-month anniversary of the fires, and now her first holiday season out of her home.
Had she made a different decision, taken Farmers’ first estimate and moved right back in, she’d have been back home months ago, like some neighbors, instead of trying to improvise holiday meals without the pots and pans she’s used for years.
But when she daydreams about being home for the holidays, she also wonders: What if her daughter had gotten sick? What if she had developed lead poisoning because her mother didn’t fight back?
“We miss our lives in our home so much. I miss our community, I miss our neighbors,” she said. “Limbo is a term I think about a lot. We’re not back home, we know there’s issues, we know we will be back home. But when?”
Chronicle staff writer Brooke Park contributed to this report.
Credits
Reporting by Susie Neilson and Megan Fan Munce. Visuals by Stephen Lam. Visuals editing by Nicole Fruge. Editing by Ryan Gabrielson, Kate Galbraith and Demian Bulwa. Design and development by Erin Caughey. Design and development editing by Alex K. Fong. Data editing by Dan Kopf. Copy editing by Linda Houser/Tafur. Audience by Jess Shaw, Elisabeth Smith and JJ Juarez.
December 5, 2025
By Sara DiNatale, Megan Fan Munce, Susie Neilson
As the Los Angeles wildfires died out in January, firefighters trekked through the burn zones to take stock of the destruction. For every home they found leveled, they counted another still standing. The structures looked fine from the outside, but ash and oily soot often coated the floors and furniture, while invisible chemicals burrowed into clothes, blankets and even walls.
Many of these smoke-soaked homes quickly became battlegrounds. On one side were cost-conscious insurance companies, who largely resisted testing for heavy metals, ordering the homes wiped clean and telling policyholders it was fine to move back. On the other, survivors of the Eaton and Palisades fires, fearful that the dangerous pollutants dusting their homes could one day make them sick.
But a Chronicle investigation of the 13-member committee, whose meetings are currently closed to the public, found that it doesn’t have a single toxicologist or scientific expert in the changing chemistry of smoke from urban fires. Instead, its five technical expert voices include three consultants who have spent years helping insurers dispute consumers’ smoke-damage claims and defending the companies when those policyholders sue.
These three consultants have fought Los Angeles County fire survivors’ independent test results of contamination in their homes on behalf of at least half of California’s biggest insurance companies, reducing insurers’ potential costs, the Chronicle found. And they have done so using practices that, while aligning with certain standards in the environmental-testing industry, conflict with academic research.
Wildfire survivors and advocates tracking the task force’s activities fear it will effectively write the home insurance industry’s playbook for minimizing damage claims into California law, with ramifications for homeowners’ payouts — and their ability to recover from disaster — for decades to come.
“I am very concerned about undue influence,” said Amy Bach, one of two consumer advocates on the task force and the executive director of the advocacy group United Policyholders.
Bach said she had recommended what she considered a balanced slate of experts to the task force, including public adjusters, plaintiffs’ attorneys and consumer-focused hygienists, who test for contamination and recommend cleaning protocols. Because the final composition so leans toward insurers’ point of view, she said, “I do not believe this panel is in a position to issue recommended standards.”
Deputy Insurance Commissioner Tony Cignarale, who chairs the task force, told the Chronicle that the state agency vetted each member, gauging their qualifications and how “open-minded” they seemed. He said he was aware that some members of the committee primarily work for insurance companies, but that the department balanced membership between industry and consumer voices.
“It would be inappropriate of us to just bring in all consumer-oriented hygienists, so to speak, and come up with (recommendations), then try and shove it down the insurance companies’ throat,” he said.
The department, however, did not ask candidates for the task force to disclose the extent of their financial ties to insurers. The Chronicle found that companies associated with three members — Brad Kovar, Hamid Arabzadeh and Michelle Rosales — primarily advertise their services to insurance companies online, are on insurance companies' internal lists of go-to experts, and write reports on behalf of insurance companies that challenge testers brought in by homeowners.
The other two technical experts on the committee come from companies that work for both insurers and homeowners. The task force is rounded out by two insurance industry lobbyists; two consumer advocates, including Bach; a pair of public health officials and a deputy director for Cal Fire, the state’s fire response agency.
Kovar is the CEO of testing company Safeguard EnviroGroup and a co-owner of legal consulting firm EnviroLegal. He and his companies have written reports criticizing Los Angeles homeowners’ testing results on behalf of State Farm General Insurance Co.; Farmers Insurance Group; the California FAIR Plan; and the Interinsurance Exchange of the Automobile Club, the AAA-affiliated insurer for Southern California.
While Kovar said his companies’ services “are available to all parties and entities who request” them, an insurance department spokesperson said Kovar was selected “with the knowledge that his primary business interests were with the insurance industry.”
Arabzadeh, the head of HRA Environmental Consultants, told the Chronicle he believes that practically every type of contamination from wildfire smoke inside a dwelling can be vacuumed or wiped clean, a view supported by some industry-sponsored environmental testing research but disputed by independent scientists.
Rosales is the director of environmental health services for Forensic Analytical Consulting Services, or FACS, which has worked closely with insurers including State Farm to inspect wildfire contamination for more than a decade, records show.
The Chronicle examined hundreds of pages of reports written by Kovar, Arabzadeh and Rosales on behalf of insurers, and found that they routinely failed to describe the potential health risks posed by harmful chemicals found in survivors' homes while attributing some contamination to candles and unused fireplaces rather than the wildfires.
The three members often advocate for primarily using sight and smell to investigate smoke damage to a home, and Kovar and Arabzadeh have claimed that more rigorous chemical testing can be unnecessary or misleading, even though many chemicals being found in Southern California homes are so toxic they can sicken people, especially children, at levels in which they are invisible and odorless.
The decontamination methods these members recommend — often high-powered vacuuming and cleaning alone — are increasingly being challenged by new studies. As major fires become more urban and toxic, the studies show, survivors with smoke-ridden dwellings might have to replace walls and throw out furnishings and other items to truly make their homes safe.
Kovar, in a lengthy written response to questions, denied that insurance companies comprised the majority of his company’s customers, saying he has performed tests for more than 140 non-insurer clients in Los Angeles. He said his protocols are up to par with industry standards, citing a guidebook he co-authored.
“Concerns about potential bias are understandable,” he wrote. “What I can say with confidence is that my involvement on this Task Force is grounded in the same principle that has guided my entire professional career: a commitment to objective, evidence-based practice.”
In a written statement, Rosales said her company performed post-wildfire testing for a range of clients, including homeowners, insurance companies and schools. While it’s true that “most wildfire damage assessments … by FACS or others, are at the request of insurance companies,” she said, this alone did not bias her reports.
“The fact that an insurance company or any other client may pay for our services has no bearing on our conclusions or recommendations,” she wrote.
Arabzadeh said in an interview that he had tested between 40 to 60 homes after the Los Angeles wildfires, the majority for insurance companies and the rest pro bono for homeowners. He said he believes the science around testing and cleaning homes is established and that current methods such as vacuuming and wet wiping are usually sufficient. He criticized some hygienists for conducting what he called “irrelevant” testing for vast arrays of chemicals, then needlessly dramatizing their findings as evidence of irreversible contamination.
“They’re scaring people,” he said, adding, “We do not live in a sterile world.”
To understand the battle over smoke damage playing out in Los Angeles and its scientific underpinnings, reporters interviewed 20 experts, including industrial hygienists, remediation contractors and researchers who study wildfire contamination. They also spoke to more than a dozen industry representatives and homeowner advocates.
Testing companies have found alarming levels of heavy metals and carcinogens inside of hundreds of survivors’ homes, including lead, a known component of wildfire smoke that can cause birth defects and harm children’s brain development. The Environmental Protection Agency and the Centers for Disease Control and Prevention advise there is no safe level of lead in a child’s blood. Testing has also detected potentially dangerous levels of asbestos, beryllium and arsenic dusted across kitchens and children’s bedrooms within the burn zone.
Karen Collins, one of two insurance industry advocates on the task force, said insurers are committed to establishing science-backed standards for how to remediate such contaminants. Without standards, insurers too are left vulnerable — to superfluous litigation and opportunistic contractors, she said.
Collins, a vice president at the American Property and Casualty Insurance Association, pointed to a recent training that offered to teach contractors the “exciting opportunity” of smoke-damage claims, touting its high potential profit margins.
But the homeowners interviewed by the Chronicle said they’re not trying to squeeze their insurers. They just don’t want to move back into buildings that could slowly poison their families.
“Our damages in Altadena from toxicity are being compared to 9/11,” said Libby Godwin, an Altadena resident struggling with a smoke-damage claim. “The idea they’re putting together a task force to support them putting us back in that space, it’s really just unconscionable.”
The showdown
When the Department of Insurance announced the formation of the Smoke Claims & Remediation Task Force in May, many survivors of the Los Angeles fires expressed cautious optimism. Hundreds had battled their insurance companies for months to cover even the most basic tests.
One Altadena resident, Karen Girard, returned home after the fires to find dark ash speckling her white clothing and piled up at the foot of her bed. Sealed jars of marshmallows and white chocolate chips in her kitchen cabinets had turned brown.
Foremost Insurance Group — a subsidiary of Farmers, the second largest home insurer in California — told Girard the home just needed to be cleaned. She asked her insurer to pay for an industrial hygienist to sample the debris and determine whether it contained chemicals that could endanger her health. Foremost said no — until the county warned residents living near the burn zone could be exposed to lead and asbestos.
At that point, the insurer tapped its own vendor to come to her home. Their sampling found lead at a level several times higher than federal safety standards, as well as arsenic. When the vendor recommended professionals only clean the areas of the floor around her windows, Girard sought a second opinion.
Girard’s tester, M.A.R.S. Environmental, found lead, arsenic, chromium and nickel. It recommended going beyond rigorous cleaning by at a minimum replacing drywall and insulation. Her insurer fired back again — this time, by hiring Kovar’s legal firm, EnviroLegal. His firm wrote a report that argued the deeper test results were “unreliable.” Foremost then refused to reimburse Girard for M.A.R.S.’ testing costs and pushed back on its recommendations.
“It became a showdown,” she said. “They weren’t remotely interested in keeping me safe.”
Stories like Girard’s have played out repeatedly across the Eaton and Palisades fires’ burn zones.
The Chronicle reviewed three dozen reports authored by members of the task force or employees of their companies for homes in Altadena or the Pacific Palisades neighborhood. Some were original test results and recommendations, while others were critiques of work done by other experts. Reporters also interviewed more than three dozen survivors with smoke-damaged homes.
Nearly all described similar experiences: After insurance companies declined to cover testing for contaminants in their homes, they paid for it themselves. It was only then, they said, that their insurers hired experts of their own, who were often members of the task force or the companies that employ them.
Nineteen of the reports the Chronicle reviewed didn’t involve any new testing. Instead, Kovar, Arabzadeh and their companies wrote “rebuttal reports” to refute outside testers’ conclusions. Many of the reports authored by Kovar and his associates contained identical language that appeared to have been copied and pasted.
When they performed their own tests, the committee members’ methods were typically less comprehensive than those used by the testers hired by homeowners, the Chronicle found. For instance, Kovar’s Safeguard EnviroGroup routinely used a cheaper and less sensitive method to test for asbestos — which Kovar said was the “standard method for identifying asbestos-containing building materials in debris.”
In one case the Chronicle reviewed, the test failed to find asbestos in a home before a more sensitive test paid for by the homeowner picked up the mineral, which can cause the deadly cancer mesothelioma.
“They’re coming in already as an adversary,” said Debbie McMahon, a AAA policyholder.
McMahon’s ash-filled Altadena home is a time capsule of the days just before the fire, her Christmas tree still pitched in the living room. She said Safeguard technicians visited the house in late September, wearing almost no protective equipment and using a company business card to scoop up a pile of ash. They balked when the tester she’d hired questioned their methods. McMahon was so rattled, she said, that she obtained her own lead sampling certification.
In reports the Chronicle reviewed, the members’ firms’ recommendations for cleaning and restoration were consistently less extensive than what companies hired by homeowners suggested.
In at least six cases, samples taken by Kovar’s firms went to Liberty EnviroLab, a laboratory company with locations in the Southern California cities of San Marcos and Cerritos, for analysis. On LinkedIn, Kovar suggested Liberty was the “new gold standard” of testing and said Safeguard was “sending a lot of business” its way.
State records show the firm was originally registered at a single-family home in Temecula — the same home Kovar listed as his mailing address for his two other companies, EnviroLegal and Safeguard. Kovar did not mention the ties in either his formal reports reviewed by the Chronicle or his social media posts. He told the Chronicle that he provided “initial financing” for the lab, but that he plays no role in directing its current operations.
Safeguard did, however, promote Kovar’s role on the task force on Instagram. “Trust the experts who helped define the rules,” read the post. “Book your inspection today.”
All members of the task force, including Kovar, signed an agreement with the Department of Insurance promising not to use their positions for “private gain or advantage,” according to Cignarale.
Asked about the Instagram post, Kovar said it was a “factual disclosure” that “highlighted our technical expertise and participation in standards development,” but was not intended for private gain. A spokesperson for the Department of Insurance said the department did not feel the post violated its standards, but asked Kovar to delete it after the Chronicle’s inquiry.
Down the ‘rabbit hole’
New research is showing that smoke from the urban infernos in Los Angeles — carrying charred bits of century-old houses and brand-new electric cars, paint fumes and particles from lithium batteries — is far more dangerous than what wildfires historically carried.
Michael Jerrett, a UCLA environmental health professor, is part of a coalition of scientists known as the L.A. Fire Human Exposure and Long-Term Health Study that has been investigating how emissions from the historic blazes impact public health. Jerrett has been studying the air quality inside homes since the second day of the fires.
His team has found that homes held on to high levels of toxic compounds for weeks or even months after the flames subsided because couch cushions and porous drywall soak in the chemicals and then release them into the air over time.
“Nobody should be going back and living in this toxic soup” without thorough decontamination of the structure and belongings, Jerrett said.
Joe Nieusma, a veteran Colorado toxicologist, said that any state crafting wildfire smoke insurance guidelines needs to factor in recent research on the shifting characteristics of smoke contamination. In a study published this year, Nieusma found that microscopic smoke particles — with diameters one-hundredfold smaller than a human hair — embed in HVAC systems and a home’s tiniest crevices. Even the most heavy-duty vacuums cannot capture them all, and a home’s natural airflow will eventually recirculate them.
Jerrett’s colleague on the L.A. Fire HEALTH Study, UCLA environmental health professor Yifang Zhu, is studying whether household washing machines effectively clean wildfire-contaminated clothing. While her research remains preliminary, one experiment found that even three cycles of washing and drying did not rid a piece of fabric of wildfire contaminants known as volatile organic compounds — gas pollutants spread by fires that can embed into porous items, walls and surfaces. She’s collected more samples to further test the finding.
An August pilot study by federal scientists found that washing lead-contaminated clothing in residential washing machines did not completely remove the heavy metal. Worse, the scientists found that some of the lead lingered in the machine and spread to previously uncontaminated loads of laundry. Other metal particles such as beryllium spread similarly, experts said, and eventually can absorb into people’s skin.
Despite this, Kovar, Rosales or people working for their companies recommended machine-washing to cleanse contaminated clothing and bedding in nine reports reviewed by the Chronicle.
Across five reports, Kovar’s Safeguard and Rosales’ FACS provided the same advice word for word: “Washable fabrics, including clothing, linens, small rugs, and other soft items can generally be machine-washed twice with hot water and detergent. Dry-cleaning is also generally acceptable.”
In another two reports, Kovar’s firm EnviroLegal recommended “hand or high-temperature machine washing and deep cleaning,” adding, “If the material is heavily soiled or made from delicate fabrics, consult a professional cleaning service.”
Despite the reports’ wording, Kovar told the Chronicle his company “never recommends that homeowners wash lead-contaminated clothing in their own machines.” He added that he includes language at the top of every report saying his cleaning recommendations should be undertaken by professionals “in compliance with all local and federal regulations.” Rosales said her company recommends professional cleaning of items “when lead remediation is indicated.”
Even professional cleanings by remediation companies can fail to cleanse living spaces, experts told the Chronicle.
Eaton Fire Residents United, a coalition of fire survivors, obtained lab results from 50 homes that had tested positive for harmful substances, such as lead and mercury.
Of those, 45 homes initially tested positive for lead and underwent cleaning, most through methods approved by insurers. All but two of them still contained levels above EPA standards when retested. Out of 25 homes cleaned to remove asbestos, nine still tested positive for the carcinogen after remediation.
Post-cleanup testing is “absolutely crucial,” Nieusma said. But while task force members’ reports often recommended at least some post-cleanup testing, the Chronicle found some insurance companies regularly denied coverage for such tests.
Knowledge of chemicals like these — and where they show up in homes — is critical to understanding the health hazards from fires that encroach into residential areas, said François Tissot, a geochemistry professor at the California Institute of Technology who is studying the heavy metals and lead deposited in peoples’ homes by the Eaton Fire.
“You’re burning houses and industrial materials and construction materials,” he said. “The tests and cleaning protocols which have been tested for wildfires might not apply to an urban firestorm.”
Yet in interviews and materials reviewed by the Chronicle, insurer-aligned task force members took the opposite view. They’ve argued that the rudimentary tests they’ve been using to assess smoke damage for years are sufficient for Los Angeles fire survivors, dismissing more thorough chemical testing as unnecessary and even a waste of policyholders’ money.
As a member of the task force, Kovar invited members of a hygienist industry group to give the committee a presentation, which said comprehensive testing for toxic substances can be an “unnecessary rabbit hole.”
The presenters, along with Kovar, are co-authors of a technical guide book that lays out instructions for evaluating homes after wildfires. The guide was co-authored by 17 testing and remediation professionals. However, critics argue its recommendations — which place a heavy emphasis on the use of sight and smell during investigations — have not kept pace with research revealing the toxicity of urban fire smoke, and the stubborn persistence of potentially harmful but invisible and odorless chemicals inside affected dwellings.
Kovar said the term “rabbit hole” referred to the “misuse of complex analytical data” by some testing companies which wrongly claim homes need “to be torn down based on the mere detection” of chemicals from wildfire smoke.
Cignarale noted that the task force was also soliciting presentations from a “diverse” array of stakeholders, including other hygienists and legal experts. A spokesperson for the department added that the panel has taken “extensive public input” via presentations from outside groups, such as Eaton Fire Residents United and Whelton, the Purdue scientist.
In an interview in early November, Arabzadeh initially told the Chronicle that testing is not always necessary if char and ash are visible inside a home, because cleaning protocols will be the same regardless of what is found.
“That money would better be spent on getting remediated,” he said.
Nieusma told the Chronicle this is inaccurate, as particular chemicals require specialized and at times intensive cleaning methods. In cases of asbestos contamination, experts strongly recommend that government-certified asbestos consultants evaluate risks and guide cleanup efforts. Contractors removing lead are required to have state certifications and use special solvents.
Asked about these requirements on a follow-up call several weeks later, Arabzadeh backtracked, saying he believed that testing should be done anytime there’s a reason to suspect asbestos and lead contamination, which he defined as the home having visible debris.
Sniff test
Asbestos is odorless. Lead dust doesn’t have a distinct scent, either. Lab analysis has confirmed the widespread presence of both in the burn zones — particularly in Altadena, where most of the homes that burned were built before the harms of asbestos-laden insulation and lead paint were widely recognized.
Regardless, the Chronicle found, insurer-aligned experts have advised survivors and workers remediating their homes to sniff their belongings to determine whether they need to be cleaned further.
After Foremost denied Karen Girard’s request to replace her soot-laden couch and clothing — a recommendation made by the tester she hired — the insurer sent out a lead abatement company that promised it could fully clean her belongings.
Girard said she told company representatives she was not convinced, and that they offered her a compromise: After they cleaned, if she held her nose to her couch and could still smell smoke, they’d simply clean it again.
“Are they freaking serious? I have asthma,” she said. “Even if I didn’t have asthma, that’s a dangerous thing to do. They are ignoring basic science, and they say these things to you as if they sound reasonable.”
Kovar has recommended a similar approach. In two reports reviewed by the Chronicle, he advised that bedding, clothing, rugs and other items contaminated by wildfire residue can generally be cleaned, though it may take several passes. To determine if something had been fully cleansed, Kovar suggested the item be “sniff tested” to see if it still had any odor.
“I wouldn’t advise that,” said Jerrett, the UCLA environmental exposure expert. He said that a person who sniffs a contaminated item could inhale harmful chemicals.
In a statement, Kovar told the Chronicle that the sniff test was a “professional restorer verification method, not a consumer instruction” and that the method was supported by industry guides.
In April, Safeco, a subsidiary of Liberty Mutual, hired a technician from FACS — task force member Rosales’ employer — to test two homes in Altadena, according to reports reviewed by the Chronicle. Previous sampling at both homes had found levels of lead several times higher than the EPA’s standards.
In one home, the technician smelled smoke throughout the home, while in the other, which she entered while wearing a respirator, she did not smell smoke, she noted in the report. Wearing a respirator can block scents, remediation experts told the Chronicle.
In the report for the house that smelled, the technician advised that the mattress and other non-washable soft goods were not cleanable and should be thrown out due to the “heavy smoke odor” and visible soot. In her report on the home where she didn’t pick up an odor, which Rosales co-signed, the technician advised that clothing and small rugs could be machine-washed or dry-cleaned. She did not recommend throwing out anything in the house.
Rosales said in a statement that the company would not comment on specific clients but that FACS considers sensory observations, the presence of non-wildfire contamination sources and other factors when testing homes.
Andrew Whelton, an environmental engineering professor at Purdue University who has reviewed more than 500 testing reports from Los Angeles fire survivors at no cost, said there’s no science backing up the idea that two homes that were heavily contaminated by lead should be treated differently based on whether they smell.
Yet in a survey collected by Whelton and graduate students at several universities, more than 180 residents in the Eaton and Palisades fires said they’d been advised to sniff their belongings, many by their insurance companies, hygienists or remediation contractors.
“It is one of the most reckless things someone can recommend when it comes to contaminated buildings,” Whelton said.
Background levels
In the reports reviewed by the Chronicle, Kovar, Arabzadeh, Rosales and their companies didn’t deny the presence of harmful chemicals inside homes in Los Angeles County. Instead, their reports stated that high levels of lead and other contaminants might have been in those residences before the fires.
Testers refer to this concept as “background” contamination, and experts agree that some chemicals may exist in low levels in homes before a fire. But the three task force members repeatedly claimed background levels could have been responsible for results even when tests showed levels of lead were up to thousands of times higher than federal safety standards — or when they found high levels of metals like cadmium and beryllium that are unlikely to be found in homes under normal circumstances. They pointed to pollution, candles and barbecue pits as possible sources.
Arabzadeh told the Chronicle he had “never, ever, ever” attributed cadmium found in a home to background contamination, despite having written at least one rebuttal report that challenged a homeowner-hired tester for not considering “background sources” after she found cadmium.
For two homeowners in Altadena, one insured by AAA and the other by Farmers, Kovar suggested the previous tester should have considered whether the visible ash and debris the homeowners found after the Eaton Fire could have instead been caused by a fireplace, candles or street pollution.
In the case of one survivor, Arabzadeh was hired to review the work of a homeowner’s tester who found multiple samples that far exceeded the federal standards for hazardous lead dust. The homeowner’s lead levels ranged up to nearly 70 times the EPA lead limit for floors.
“Such exceedances are not unusual in urban environments,” Arabzadeh wrote in his review.
Tissot, the Caltech researcher, said the results were “not even close to background levels.” He said, “It’s incredibly obvious nobody’s house had that much lead in it (before the fire). If that was the case, all children in Altadena would be lead-poisoned.”
Families are aware of lead risks in their old homes. That’s why Andrew Wessels and his partner got their 1-year-old son’s blood tested to check lead levels just a few months before the fire. They came back negative. After a post-fire testing report found lead in dust samples throughout the home — including one taken from the floor of the nursery — Kovar’s consultant wrote in a rebuttal that the lead levels could have been present before the fire and that finding it was “not remarkable.”
The consultant cited a 2018 study — which found above-background levels of lead in the soil of some parks far west of Altadena — to argue that the whole of Los Angeles County has more lead than other places. Two-thirds of the parks in the study did not have elevated lead levels in their soil, yet the reports suggested lead was “widespread in soils in Los Angeles County parks.” He made the same argument to six other families with elevated levels of lead.
Arabzadeh said in one report that cyanide found in a hallway baseboard could have come from a homeowner’s fireplace.
“Burning wood is known to produce hydrogen cyanide,” he wrote.
Yet the home’s gas-powered fireplace did not burn wood and vented to the outdoors, making it unlikely it would have emitted measurable cyanide into the home.
Jesse Morrow, the homeowner, said he grew angry when he read a line in the report suggesting the cyanide levels were low enough that they would only be fatal if his family members ate the house.
“For context, a 25 kg child would need to eat about 100 kg of baseboard at this concentration to increase the risk of death,” Arabzadeh wrote.
“It felt condescending,” Morrow said, adding he wasn’t just worried about “instant death,” but about getting sick over time.
While there’s no established limit for cyanide inside a home, long-term exposure can affect vision and lead to nerve damage, Nieusma said.
“To single out one toxic species in one round of exposure, to say a (child) would have to eat their body weight in baseboard to get toxic exposure, is not only condescending but it’s misleading,” he said.
Arabzadeh’s report ultimately recommended the Morrows’ clothing, blankets and other soft items be disposed of, and Amica, Morrow’s insurer, has agreed to reimburse them. However, he said the insurance company has not agreed to all of his hired hygienists’ recommendations, including replacing affected drywall and flooring.
A similar claim came from Rosales, whose employer, FACS, is regularly hired by State Farm, Liberty Mutual and others to test homes during claim conflicts.
After inspecting a home infiltrated with debris from a 2012 Colorado wildfire, Rosales suggested in an insurer-commissioned report that a homeowner’s fireplace and candles — not the fire — were sources of smoke deposits found in the home even after an insurance-approved cleaning. The homeowner, Kerri Waite, told the Chronicle that’s impossible: The gas-powered fireplace hadn’t been turned on in a year and the tea light candles had never been lit.
‘Child endangerment’
Nearly a year after the fires, many owners of smoke-damaged homes remain displaced, unsure when it will be safe to move back. A September survey commissioned by the Department of Angels, a survivor advocacy group, found that two-thirds of Altadena residents and three-quarters of Pacific Palisades residents — including those with smoke damage and those who lost their entire homes — were still living in temporary housing.
For Mackenzie Schneider, temporary housing means being apart from her longtime friends and neighbors during one of the most traumatic periods of her life.
In April, a testing firm she’d hired discovered elevated levels of lead throughout her house. Schneider’s firm recommended she throw out soft items that could be contaminated with lead, including her 8-year-old daughter’s bedding and the plush rabbits and mice in her dollhouse.
In June, Farmers sent Schneider a report written by Kovar. His review suggested the lead found in her daughter’s bedroom might have come not from the wildfire, but from lead paint in the home, which he noted was not banned until 1978. Schneider’s home was built in 1992 — a fact she said Kovar might’ve known if he had ever tried to speak with her or visit the property.
Further, Kovar added, because the testing company she hired did not take a type of control sample known as a field blank, “opposing counsel could argue” that the findings could have been compromised, which “could lead to the survey being excluded or heavily discredited in court.”
Kovar told the Chronicle that his companies’ reports “assess scientific validity, not legal strategy.” But the Chronicle reviewed four reports, including Schneider’s, that contained the same paragraph. Schneider said she had never mentioned plans to sue.
Kovar concluded that the original tester’s report was unreliable, supporting Farmers’ position that the home could be easily cleaned. The insurer then cut off the money it was paying for her rent.
Farmers said in a statement that it would not comment on specific customers, but that its goal is to resolve claims and pay them out “quickly and fairly.”
“To me, this is like child endangerment. They’re pushing and pushing and pushing for me to move back into a contaminated home with an 8-year-old, and lead is incredibly dangerous for her,” Schneider said. “That’s where it gets really personal for me.”
She said she tried to dial the number under Kovar’s name to ask him questions but was met by an empty dial tone. Schneider felt like she had no options left. She started looking for a lawyer.
July 2, 2025
By Megan Fan Munce, Susie Neilson
Krista Copelan’s home didn’t burn in the Eaton Fire. But for months afterward, it was filled with poisonous traces of things that did.
Arsenic from treated wood and pesticides in the soil. Copper, likely from the wiring systems of the thousands of homes reduced to ash. Lead, discovered on the floor of her daughter’s bedroom, from old paint and leaded gasoline that leached into the ground only to be vaporized by flames.
And on Copelan’s kitchen floor: beryllium.
A little-known earth metal prized for being lighter than aluminum but more rigid than steel, beryllium is safely used commercially in numerous products, including electronics and cars.
But when heated, objects containing beryllium can release the metal as microscopic particles that infiltrate the lungs. The substance is so dangerous that even a minuscule concentration in air over time — equivalent to a few grains of salt in an Olympic-size swimming pool — can spur development of cancer cells, or a lifelong and sometimes fatal respiratory disease.
Beryllium has been found in dozens of homes in the Eaton and Palisades fire zones, test results obtained by the Chronicle show. Air quality monitors also picked up on elevated levels in the outdoor air in Los Angeles as late as this May.
April 2, 2025
By Megan Fan Munce, Susie Neilson
Most homeowners think their insurance policies will offer full protection if they lose their houses in disasters. But that belief may be misplaced. A Chronicle investigation found that many California policyholders are underinsured, meaning they would not receive enough money to rebuild a home similar to the one that was destroyed.
Homeowners can reduce the likelihood of finding themselves underinsured by following these steps:
Read your policy documents
To figure out if you might be underinsured, the first step is to determine how much you’re insured for.
A typical homeowner’s insurance policy in California comes with a page that summarizes coverage limits.
The California Department of Insurance provides a breakdown of what each type of coverage will pay for. But focus on “Coverage A.”
Coverage A is the amount of money you’d get for your home and any attached structures, such as a garage. It’s also the figure that determines your Coverage C, or contents coverage. Typically, your contents coverage is some percentage, often half, of your Coverage A amount. You can’t use your Coverage C to rebuild your house. (Coverage B is usually the money you’ll get for unattached structures, like sheds and other outbuildings.)
Whether you’re renewing your policy, or shopping for new insurance, always pay attention to the coverage limits — though of course if you raise your coverage limit, you are likely to pay a higher premium.
Understand different types of coverage
There are two common types of insurance policies in California: actual cash value and replacement cost value.
An actual cash value policy will only pay for the depreciated cost of your dwelling and the personal contents inside of it. This figure is usually far less than what’s needed to rebuild, because it factors in the age of your home and belongings and the wear and tear on them.
A replacement cost value policy, however, aims to cover the cost to replace your home and its belongings in today’s dollars. It caps payouts at a certain limit, usually your Coverage A plus any extended replacement cost coverage you’ve purchased (more on that later).
Sometimes, insurance policies include a mix of different types of coverage. For example, your home may be covered for replacement cost value, but the possessions you have inside may only be covered for their actual cash value.
In order to get the most out of your policy, you’ll be required to actually replace your home either by rebuilding it, on the same lot or somewhere else, or by purchasing a new home, explained Dan Veroff, a San Francisco-based plaintiff’s lawyer specializing in insurance cases.
To get replacement cost value for your belongings, your insurance company may require an itemized list of what you lost as well as receipts showing what you paid to replace this property. (A bill recently introduced in the California legislature would get rid of the requirement for an itemized list.)
If you choose not to rebuild, your insurance company will only pay you for the depreciated value of your insured property, or its actual cash value, even if you have a replacement cost value policy, Veroff said.
Be aware that there are deadlines for claiming your full replacement cost value. California law gives policyholders 12 months from losing their homes to make their final claims to their insurance company, or 36 months if the loss was due to a natural disaster for which the governor calls a state of emergency. The state law also entitles policyholders to extensions of six months at a time if there are delays out of their control, such as permit application times.
Purchase more extended replacement cost coverage
Many insurance companies offer what’s known as extended replacement cost coverage: an extra 10% to 50% on top of your base coverage limit in the event that your initial limit isn’t enough to cover the full costs of rebuilding.
Extended replacement cost coverage is especially crucial if you lose your home in a natural disaster such as a wildfire or hurricane. Following widespread destruction, the increased demand for construction materials and contractors drives up prices — a phenomenon known as “demand surge.”
Research by the analytics firm Cotality estimates that demand surge can cause prices to rise 15% to 30% for up to a year after a disaster. Extended replacement cost coverage will kick in even if you don’t lose your home to a catastrophe, according to Janet Ruiz, a spokesperson for the Insurance Information Institute, an industry group.
Purchasing extended replacement cost coverage is often cheaper than selecting a higher coverage limit, experts said.
In 2021, 90% of insured homeowners in California purchased extended replacement cost coverage, according to data collected by the California Department of Insurance.
Still, purchasing extended replacement cost coverage does not guarantee you will be fully covered. In fact, studies in California and Colorado have found that even homeowners with this extra coverage are still likely to be underinsured if their home is destroyed in a disaster. But the more of it you have, the less severe your underinsurance is likely to be.
Request a copy of your replacement cost estimate
Most insurance companies offer their customers an estimate of what it might take to rebuild their home after a natural disaster. But these estimates are often created by algorithms that routinely underestimate the true cost of rebuilding, leaving homeowners underinsured in the wake of a disaster, the Chronicle found.
That is partially because these algorithms are making educated guesses about your house, and those guesses are often based on incorrect assumptions. For instance, a replacement cost estimator might think your home is only one story, because other houses in the area are one story. But if your house is actually two stories, the algorithm’s estimate for it will likely be far too low. The tool may also use outdated or inaccurate information about your home’s square footage and other basic characteristics, whether or not you’ve done upgrades.
You can’t control how your replacement cost estimate will come out — the algorithms behind it are too complex — but you can verify that it’s using mostly correct features of your home. Ask your agent for a copy of your “detailed replacement cost estimate,” which is the report generated by estimator algorithms. You are entitled to this report under California law.
Go through your report with your agent and alert them to any incorrect home characteristics so they can update the estimate. If you’re not sure about a detail, try asking a realtor or contractor.
Get an independent estimate
Even if you take extra steps to ensure your algorithm-generated estimate is using accurate data, it could still undervalue your home’s true rebuild cost. Construction experts told the Chronicle that these tools rely on pricing data that doesn’t truly capture the high cost of construction in California.
These experts said that homeowners can avoid being underinsured by getting an independent rebuilding estimate — though it costs money to get one.
The most accurate, but expensive, option is to have a contractor do a full inspection of your home and create an estimate of what it would take to rebuild, said Amy Bach, executive director of United Policyholders, an insurance consumer advocacy group.
An easy way to get a ballpark estimate of a reasonable replacement cost is to call a few contractors in your area and ask what their average price per square foot is for building new homes, Bach said. Then, multiply that number by the square footage of your house. If you aren’t sure of a trusted contractor to call, try checking local building associations or with your realtor, Ruiz said.
When you talk to contractors, make sure to describe the specific features of your home that might influence how expensive it would be to rebuild, Bach advised.
Your rebuilding costs will be above average if you have a custom home or particularly expensive features, such as granite countertops or hardwood floors.
The cost of purchasing your home is not an accurate proxy for what it would take to rebuild it. For one, your home value reflects the cost of the land, which your coverage amount should not. For another, California’s construction costs have soared in recent years, and experts told the Chronicle that in some parts of the state, it can be more expensive to build a new home than it is to purchase an existing one, even if the new home sits on land you already own.
Ruiz said homeowners should treat the replacement cost estimate supplied by their insurer as a baseline, rather than a final recommendation. She encouraged all homeowners to do their own research and ask their agent questions until they find a coverage limit that’s right for them.
Find other ways to save
Over the past few years, many of California’s largest home insurers have increased rates by double digits. Some have also dropped thousands of customers, some of whom have ended up with an expensive policy from the California FAIR Plan, the state’s insurer of last resort that only provides coverage for fire damage.
But if insurance becomes unaffordable, Ruiz said there are much better ways to save than by underinsuring your largest asset. In fact, coverage and premium don’t increase at the same rate. The price of getting more coverage becomes less expensive the higher you go, due to the relatively low likelihood of ever losing your entire home at once.
One way to reduce your premium is to increase your deductible. Doing so means you’ll have to pay more money out of pocket in the event of a disaster before your insurance company will step in. But crucially, Ruiz said, you’ll know exactly what that amount is and be able to plan for it. If feasible, Ruiz’s advice is to maintain a savings account with the amount of your deductible in it, typically $1,000 to $5,000. That way, the money will be there if you need it, but if you don’t, you’ll be able to accrue interest on it.
If you do need to cut coverage in order to make insurance more affordable, consider reducing the coverage for your personal contents, or detached structures such as sheds, rather than the coverage for your home itself, Bach said.
Purposefully underinsuring your home can have other consequences. Most insurance company contracts contain a provision stating that if you deliberately purchase insurance covering less than 80% of the replacement cost value of your home as calculated by the insurer, then your carrier may only pay for a portion of any claims you submit, even if the claims are relatively small.
For example, say your insurance company estimates your home’s replacement cost value to be $1 million, but you only purchase $700,000 of coverage. You’ve only purchased 87.5% of your minimum coverage amount.
Then, if a kitchen fire causes $100,000 of damage to your home, your insurance company will only pay for $87,500 of that claim, even though it still falls below your overall coverage limit.
Update your coverage limit over time
Staying fully insured isn’t just a matter of setting your coverage limit right the first time. You should also make sure your coverage limit stays accurate over time.
California law requires insurance companies that offer replacement cost coverage to either update your rebuild estimate every two years, or to use an inflation index to keep customers’ coverage limits updated.
Anytime you upgrade or renovate your home, whether by installing new appliances or building an addition, make sure to tell your insurance company so it can increase your coverage accordingly, Ruiz said. Certain upgrades, such as installing new electrical wiring or a new roof, may qualify you for discounts on your premium, she said.
External factors — such as supply chain issues or tariffs that impact the cost of building materials — can also make it more expensive to repair or rebuild your home. You’ll want to make sure that your coverage limits factor in such possibilities.
Go over your coverage limit with your agent every year when your policy is renewed. But if you feel you can’t wait, you can call your agent and request a higher coverage limit at any time.
July 2, 2025
By Susie Neilson, Megan Fan Munce
A coalition of five states is investigating underinsurance among wildfire survivors after years of costly megablazes across the West, most recently in Los Angeles, and in the wake of a San Francisco Chronicle investigation that laid bare the depth of the issue.
The states’ goals are to share data and explore the possibility of either a national law or state-based regulatory reforms to address underinsurance, California Insurance Commissioner Ricardo Lara told the state Assembly Insurance Committee at a Wednesday hearing. The group includes representatives from New Mexico, Colorado, Oregon and Washington state.
It will also explore what types of information regulators could collect from insurance companies to determine how many people might be underinsured.
“We are gathering data and building our understanding of insurance gaps and how to reduce the prevalence of policyholders being underinsured after severe fire, something that all these states and their consumers have experienced after their fires,” Lara said.
Underinsurance refers to the phenomenon where a policyholder’s coverage limit — the maximum amount their policy will pay out — falls short of the total cost of rebuilding their home. While some people may choose to underinsure their home, studies show most policyholders believe they are fully insured and want to be adequately covered in the event that a disaster destroys their dwelling.
The Chronicle’s investigation found that, for decades, insurance companies have relied on faulty algorithms to estimate how much their customers’ homes would cost to rebuild from the ground up, then used those flawed figures to set policy limits for their customers. The most common tool, 360Value, is used by insurers representing at least 40% of California policyholders as well as across the country. Millions of homeowners across California are probably underinsured due in large part to the widespread adoption of these tools, which insurance agents often over-rely on and do not fill out carefully, the Chronicle investigation found.
“Underinsurance is a systemic failure that leaves wildfire survivors with devastating losses — even when they believed they were fully covered,” said Assembly Member John Harabedian, a Democrat on the Insurance Committee whose district encompasses Pasadena. “After the Eaton Fire, I’ve seen firsthand what underinsurance truly means: families facing crushing financial strain, rebuilding delays, and the heartbreak of losing not just their homes, but their sense of security and community.”
The Chronicle also found that nearly every state in the coalition had identified widespread underinsurance after at least one wildfire. In Colorado, researchers at the University of Colorado Boulder estimated that three-quarters of Marshall Fire survivors were underinsured; more than a third of those had policies that were short by 25% or more.
It is the fifth time Lara has appeared before the committee since his Sustainable Insurance Strategy, a package of reforms intended to make insurance more available, was announced more than a year ago. Assembly Member Dawn Addis, citing the Chronicle’s reporting, asked Lara how he would make certain that insurance was both available and sufficient to protect policyholders against disaster.
“My big concern around underinsurance is right now we’re having the very important conversation around can people get insurance or not. My big fear, and what I’ve heard from folks on the Central Coast is, I can get insurance but it’s simply not enough insurance,” Addis, D-Morro Bay (San Luis Obispo County), told Lara.
“That’s part of our investigation,” Lara replied. He encouraged any consumers who have found out they’re underinsured to submit a complaint to the California Department of Insurance to be used in the investigation.
In response to the Chronicle’s findings, California also began collaborating with researchers with the RAND Corp. and Ken Klein, a professor of law at California Western School of Law, to explore what data could be used to study underinsurance.
After the hearing, Addis told the Chronicle she is encouraged to hear multiple states are looking into the issue but also concerned at how widespread underinsurance is across the West.
“To me it’s a compelling reason to bring statewide legislation forward, the sooner the better. We know we’re going to have more disasters. It’s a piece we absolutely need to have our arms wrapped around as we try to stabilize the market,” Addis said.
The coalition’s formation is the latest in a series of actions taken in response to the Chronicle’s reporting on underinsurance. In May, the California Board of Equalization — the state’s agency tasked with property tax oversight — held an informational hearing into underinsurance inspired by the Chronicle’s investigation. It then issued a slate of recommendations for potential regulatory or legislative action, including requiring insurance companies to provide stronger warnings to customers that their recommended coverage limits may not fully cover the cost of rebuilding.
Plaintiffs’ attorneys have also filed major lawsuits against at least four insurance companies on behalf of underinsured policyholders in the Los Angeles County communities of Altadena and Pacific Palisades. Many of the plaintiffs in these lawsuits had homeowners’ policies that underestimated their rebuilding costs by $1 million or more.
Lara said members of the nascent coalition had been meeting for several months before the announcement.
“We got the best minds of these five states coming together to figure this issue out,” he said.
Biography
Susie Neilson is an investigative and data reporter for the San Francisco Chronicle. Her reporting has prompted changes to laws and regulations, including a California-wide ban on a debunked lie detector technology used to interrogate prisoners. Her work has received various honors, and in 2025 she was a finalist for the Pulitzer Prize in National Reporting for a series she co-reported on deadly police chases.
Previously, she spent three years on the Chronicle’s data team, where she covered topics including criminal justice and housing. She is a graduate of Northwestern University and the UC Berkeley Graduate School of Journalism.
Megan Fan Munce is a reporter on the climate team covering California’s home insurance crisis. She writes about the California FAIR Plan; State Farm non-renewals; pullbacks by other insurers such as Allstate and Farmers; policy initiatives from the California Department of Insurance; and how homeowners in the Bay Area and elsewhere are navigating the challenges.
Munce first joined the San Francisco Chronicle as part of the two-year Hearst Journalism Fellowship, spending her first year of the program at the Houston Chronicle. She grew up in the Bay Area before attending Northwestern University’s Medill School of Journalism.
Sara DiNatale covers politics and the impacts of the Trump administration’s policies on the Bay Area. She joined the Chronicle in 2025, after a decade reporting across the southern United States.
She was the recipient of a 2024 George Polk Award for her investigation on the Texas residential solar industry as an energy reporter at the San Antonio Express-News. Her investigation led Texas to adopt new state laws to regulate bad actors and scammers. She spent several years covering business, retail, the economy and labor at the Tampa Bay Times and Mississippi Today. Her reporting has been recognized with a series of state-level and national awards, including top honors from the Headliner Foundation, Best of the West and Bill Minor Prize for Investigative Reporting. She’s a graduate of the University at Buffalo and a native of Western New York.
Finalists
Nominated as finalists in Explanatory Reporting in 2026:
Brett Murphy and Anna Maria Barry-Jester of ProPublica
For an authoritative and consequential examination of the Trump administration’s freeze of humanitarian aid through the U.S. Agency for International Development, coverage that illuminated how the dismantling of the agency placed hundreds of thousands of people at risk, contradicted official assurances that lifesaving programs remained active and led to preventable deaths.
Staff of Bloomberg
For reporting on a new generation of so-called “revolutionary” cancer drugs that revealed how pharmaceutical companies, lobbyists and medical entrepreneurs have reaped huge profits while failing to show that the drugs have extended people's lives.
The Jury
The Jury
Philip Bennett(Chair)
Producer, FRONTLINE
Ann Gerhart
Deputy Managing Editor, The Washington Post
Paul Haven
Vice President and Head of Global News Gathering, Associated Press
Keith Herbert
Assistant Managing Editor for Investigations, Newsday
Amalie Nash
Vice President/Journalism, Knight Foundation
Bruce Orwall
Head of Enterprise, The Wall Street Journal
Maurice Tamman
Editor in Charge, Data & Computational Journalism, Thomson Reuters
Winners in Explanatory Reporting
Azam Ahmed, Matthieu Aikins, contributing writer, and Christina Goldbaum of The New York Times
For an authoritative examination of how the United States sowed the seeds of its own failure in Afghanistan, primarily by supporting murderous militia that drove civilians to the Taliban.
Sarah Stillman of The New Yorker
For a searing indictment of our legal system’s reliance on the felony murder charge and its disparate consequences, often devastating for communities of color.
Caitlin Dickerson of The Atlantic
For deeply reported and compelling accounting of the Trump administration policy that forcefully separated migrant children from their parents, resulting in abuses that have persisted under the current administration.
Staff of Quanta Magazine, New York, N.Y., notably Natalie Wolchover
For coverage that revealed the complexities of building the James Webb Space Telescope, designed to facilitate groundbreaking astronomical and cosmological research.
2026 Prize Winners
Saher Alghorra, contributor, The New York Times
For his haunting, sensitive series showing the devastation and starvation in Gaza resulting from the war with Israel.
Jahi Chikwendiu of The Washington Post
For a heart-wrenching and achingly beautiful photo essay on a young family welcoming the birth of their first child as the father is slowly dying from cancer.
Dake Kang, Garance Burke, Byron Tau, Aniruddha Ghosal and Yael Grauer, contributor, of Associated Press
For an astonishing global investigation into state-of-the-art tools of mass surveillance, created in Silicon Valley, advanced in China and spreading worldwide before returning to America for secret new uses by the U.S. Border Patrol.
M. Gessen of The New York Times
For an illuminating collection of reported essays on rising authoritarian regimes that draw on history and personal experience to probe timely themes of oppression, belonging and exile.