Navigating Wildfire Recovery: Insights from the Sax Agency and Industry Experts

The Wildfire Crisis: A Call to Action for HOAs

The recent wildfires, potentially causing up to $120 billion in damages, have strained an already fragile insurance market. As Demetrios Xanthos highlighted, the insurance industry is still reeling from $60 billion in collective losses in 2022 and 2023, prompting major carriers like State Farm, Farmers, and Travelers to tighten underwriting standards. This has led to reduced coverage availability, higher premiums, and a shift toward non-admitted carriers for many HOAs.

For HOA boards and homeowners, the path to recovery is complex, requiring a proactive approach to insurance, legal compliance, construction, and environmental safety. Below, we outline the critical areas discussed in the webinar, enriched with Sax Agency’s expertise in HOA insurance solutions.

1. Insurance Challenges: Filing Claims and Understanding Coverage

Key Takeaways from Demetrios Xanthos, Sax Agency

• File Claims Promptly with Primary Carriers and FEMA: Whether your property suffered direct fire damage or secondary effects like smoke and soot infiltration, filing a claim with your primary insurance carrier is essential. Even fire-adjacent properties impacted by smoke damage are likely covered under standard policies. Additionally, Xanthos emphasized filing with FEMA to address any gaps in private insurance coverage. “Do not be discouraged by a FEMA declination,” he advised. “Reopen the claim to clarify reasons, which could be as simple as a clerical error.”
• Admitted vs. Non-Admitted Carriers: Admitted carriers contribute to a state fund that protects policyholders if the insurer becomes insolvent, offering greater financial oversight. Non-admitted carriers, while less regulated, have become a necessity for many HOAs due to dwindling admitted market capacity. In 2024, Sax Agency placed three times more policies with non-admitted carriers, focusing on their financial strength to ensure reliability.
• Layered Insurance Policies: For high-value HOA communities (valued over $50 million), layered policies are increasingly common. Multiple carriers may cover different portions of the risk, with one taking the first $5 million, another the next $10 million, and so on. This approach, coupled with higher fire peril deductibles, reflects the evolving insurance landscape.
• Evaluate Coverage Adequacy: Homeowners should review their HOA’s governing documents to understand the division of insurance responsibilities. For example, in single-family HOAs, the association typically insures common areas, while homeowners cover their structures. In condos, coverage may range from “bare walls” to including interior fixtures. Xanthos recommends consulting an insurance professional to align HOA and homeowner policies, ensuring no gaps exist. Notably, loss-of-use coverage (often limited to four months) may be inadequate for prolonged rebuilding timelines, and additional coverage can be secured for minimal cost.
• Public Adjusters: Pros and Cons: Hiring a public adjuster can help negotiate higher claim payouts, especially when out-of-state adjusters unfamiliar with local markets undervalue damages. However, their fees can reduce the net recovery, particularly for large-scale HOA reconstructions. Boards must weigh these costs carefully.

Sax Agency’s Role: At Sax Agency, we specialize in tailoring insurance solutions for HOAs, navigating the complexities of admitted and non-admitted markets. Our team can review your governing documents, assess coverage gaps, and provide a marketing list of carriers to demonstrate due diligence. Contact us at https://saxagency.com to ensure your community is adequately protected.

2. Legal Responsibilities for HOA Boards

Insights from Adrian Adams, Adams Sterling

• Immediate Actions Post-Fire: Boards must notify their insurance carrier directly (not through a broker) and consult legal counsel to review governing documents. These documents outline damage and destruction provisions, dictating whether rebuilding is feasible, requires a member vote, or necessitates property sale if insurance funds are insufficient.
• Potential Legal Risks: Underinsured HOAs may face lawsuits from owners alleging negligence, such as failure to fire-harden buildings or secure adequate coverage. Boards may also need to impose special assessments to cover rebuilding shortfalls, which could spark disputes. Amending governing documents to allow flexibility in insurance requirements can mitigate these risks.
• Class Action Lawsuits: While lawsuits against utilities like Edison are likely due to fire causation, claims against the insurance industry for rising costs or coverage denials may lack solid legal grounding. However, lawsuits against cities or counties for inadequate fire response (e.g., empty fire hydrants) are highly probable.
• Proactive Fire Hardening: For HOAs in high-risk areas, boards should prioritize fire-hardening measures, such as fire-resistant paint, metal roofing, and vegetation clearance. These steps can prevent catastrophic losses and demonstrate due diligence.

Sax Agency’s Perspective: Legal and insurance issues are intertwined. Sax Agency works closely with HOA boards to ensure compliance with governing documents and to secure policies that align with legal obligations, reducing exposure to lawsuits.

3. Reconstruction Challenges and Strategies

Guidance from Russell Brown, GBE Group

• Construction Bottlenecks: Wildfires have strained construction labor and materials, with national contractors entering the market and concerns about price gouging. Local permitting offices are overwhelmed, with resources reallocated to fire-impacted areas like Los Angeles. Governor Newsom’s executive order mandates a 30-day permit turnaround, but practical implementation remains uncertain.
• Phased Recovery Process:
  1. Public Works Phase: Clearing hazardous debris, testing soils, and restoring utilities (water, power, sewage) are prerequisites for rebuilding.
  2. Permitting Deregulation: Similar to the Napa fires, California is easing regulations (e.g., bypassing CalEPA and Coastal Commission requirements) to expedite permits.
  3. Code Compliance: Rebuilt structures may need to meet updated earthquake, energy (Title 24), and fire codes, including sprinklers and fire-resistant materials like intumescent paint.
• Proactive Steps for Boards:
  • Engage architects and engineers early, as these professionals are in high demand. Consider firms outside Los Angeles, such as in the Bay Area, to secure talent.
  • Obtain original building plans online to expedite “like-for-like” rebuilds, which allow up to 110% of the original square footage without mandating all modern upgrades.
  • Partner with environmental contractors to test soils and remove hazardous materials, ensuring compliance with regulations.
  • Start the rebuilding process immediately to capitalize on initial regulatory leniency.
• Fire-Hardening Innovations: Intumescent paint, which slows burn rates, and fiber-resistant materials like Hardie board are effective fire-hardening solutions. While Hardie board is fire-resistant, additional fire-retardant paint may be required for optimal protection. These measures offer long-term benefits, including lower maintenance and potential insurance discounts.

Sax Agency’s Support: We collaborate with construction experts to ensure rebuilding aligns with insurance coverage, maximizing claim payouts for fire-hardening upgrades. Our expertise helps boards navigate the financial complexities of reconstruction.

4. Environmental Testing and Air Quality Concerns

Expertise from Oren Ashraf, Home Bio Testing

• Wildfire Impacts on Air Quality: Wildfires release a complex mix of particulates (ash, soot, char) and volatile organic compounds (VOCs) that can travel miles, affecting fire-adjacent communities. These combustible byproducts pose health risks, particularly for vulnerable groups like children, the elderly, smokers, or those with respiratory conditions.
• Testing Priorities:
  • Air Quality: Test for lead dust, asbestos, and VOCs, especially in areas like Altadena, Pasadena, and Santa Monica, where lead contamination is prevalent in 40% of tested properties.
  • Soil and Water: Soil testing is critical for playgrounds or areas with potential heavy metal contamination. For HOAs with lakes, water testing can assess risks to aquatic life from airborne debris or runoff, potentially requiring filtration or fishing moratoriums.
  • Clearance Testing: Post-cleanup air and soil tests ensure contaminants are removed, providing assurance to homeowners and insurers.
• Communication Strategies: Boards should conduct town hall meetings with environmental experts to address homeowner concerns about invisible hazards. Testing results should be shared transparently, outlining specific contaminants, remediation plans, and timelines to combat uncertainty.
• Bottlenecks in Hazardous Material Removal: Permits for hazardous material removal are limited, creating delays. Boards should secure environmental contractors early to avoid setbacks.

Sax Agency’s Commitment: We advocate for comprehensive environmental testing to support insurance claims for smoke and soot damage, ensuring HOAs have the documentation needed for coverage. Our network includes trusted environmental professionals to streamline this process.

5. Financial Preparedness: Managing Rising Costs

Panel-Wide Insights

• Insurance Premium Increases: With carriers absorbing massive losses, premium hikes are inevitable. California’s historically low rates (due to its “two-peril” status: fire and water) are aligning with higher rates in other states, reflecting broader reinsurance pressures. Boards may need to impose emergency special assessments to cover these costs.
• Construction Cost Escalation: Rebuilding costs are rising due to labor shortages, material scarcity, and new code requirements. A single-family home rebuild may take a year, while HOA projects could span 4–5 years, as seen in the Napa fires.
• Budget Adjustments: Boards can temporarily reduce budgets to reflect diminished services during rebuilding but must maintain assessments to cover ongoing expenses like insurance and legal fees. Non-payment of assessments risks foreclosure, impacting homeowners’ credit scores.
• Tax and Financial Considerations: Boards should have properties reappraised post-fire to adjust property taxes. Homeowners can use digital records (photos, credit card receipts) and HOA reserve studies to document losses for insurance claims and tax write-offs.

Sax Agency’s Expertise: We help HOAs anticipate premium increases and budget for special assessments, offering strategies to balance financial obligations with community needs. Our team can guide boards through FEMA applications and tax reassessments to maximize financial relief.

6. Effective Communication with Homeowners

Panel Recommendations

• Town Hall Meetings: Regular Zoom or in-person meetings with experts (insurance agents, contractors, environmental testers, legal counsel) provide transparency and reassurance. Homeowners value hearing from professionals, not just board members.
• Address the Unknown: Environmental concerns, like air quality, are particularly unsettling due to their invisible nature. Share testing results and remediation plans to alleviate fears. For example, addressing flame-retardant chemicals used in firefighting can demystify concerns.
• Set Realistic Expectations: Communicate that rebuilding is a multi-year process, with delays due to permitting, labor shortages, and environmental cleanup. Provide regular updates on claim progress, permit status, and construction timelines.
• Document Everything: Maintain detailed records of communications, testing results, and claim submissions to defend against potential lawsuits and ensure transparency.

Sax Agency’s Approach: We prioritize clear communication, offering to join town hall meetings to explain insurance coverage and claim processes. Our goal is to empower boards to keep homeowners informed and confident.

Key Takeaways for HOA Boards

Each panelist offered a critical piece of advice for managing wildfire recovery:

• Adrian Adams: Fire-harden properties now with fire-resistant paint, roofing, and vegetation clearance to prevent future losses.
• Demetrios Xanthos: Reassess insurance coverage with a professional to ensure adequate protection, particularly for loss-of-use and loss assessment.
• Oren Ashraf: Secure environmental contractors early and over-communicate testing results to address homeowner concerns.
• Russell Brown: Start the rebuilding process immediately to leverage initial regulatory leniency and secure architects and engineers.

How Sax Agency Can Help

At Sax Agency, we understand the unique challenges HOAs face in wildfire recovery. Our comprehensive insurance solutions are designed to protect your community, from navigating non-admitted markets to securing layered policies for high-value properties. We offer:

• Coverage Assessments: Align your HOA’s insurance with governing documents to eliminate gaps.
• Claim Support: Guide boards and homeowners through filing claims with carriers and FEMA, maximizing payouts.
• Risk Mitigation: Advise on fire-hardening measures to reduce premiums and enhance safety.
• Expert Collaboration: Connect you with trusted legal, construction, and environmental professionals.

Fill in the form to schedule a consultation and learn how we can support your HOA’s recovery. For additional resources, email questions to dearneta@organizers.com or follow HOA Organizers on social media for updates.

Looking Ahead: Building Resilient Communities

The After the Flames webinar underscored the importance of preparedness, collaboration, and transparency in wildfire recovery. While the road ahead is long, HOAs equipped with the right insurance, legal, construction, and environmental strategies can rebuild stronger, safer communities. Sax Agency is committed to being your partner in this journey, providing the expertise and support needed to navigate these challenging times.

Stay safe, stay informed, and let’s rebuild together.

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