San Bernardino County residents this week were given a close perspective of the political dysfunction that has resulted as a consequence of the sharp partisan divide between their Republican-dominated county governmental structure and the vice-lock Democrats have over California’s state government.
At issue, and consequently given short shrift, is the difficulty many California homeowners and businesses, as typified by ones in the desert and mountain areas of San Bernardino County, in obtaining and/or retaining insurance coverage on their homes or business operations, most particularly fire insurance.
Over the last decade wildfires in California have increased dramatically. The number of fires scorching 10,000 acres or more began to rise substantially beginning in 2005. Of the 20 largest wildfires in the Golden State between 1950 and 2023, 18 occurred since 2000. Ten of those eighteen took place in the two-year period of 2020-21.
Consequently, the cost of homeowners or business insurance including fire coverage began a steady increase years ago and then escalated more rapidly still beginning in 2020.
Underwriters evaluate the risks involved in insuring people and assets. Traditionally, they used actuarial data and algorithms, and in the digital age specialized software, to determine the likelihood and magnitude of each risk they would take on, adjusting the costs of the polices accordingly. With the sheer number of fires and the amount of devastation as a result of those fires increasing all over California in recent years, insurance companies found themselves in the 2020-22 timeframe paying out more money, on an annual basis, than they were taking in.
Years ago, state policymakers and legislators, recognizing the sometimes cyclical nature of disasters and anticipating the potential that a string of catastrophic events could result in a crisis in which the entire insurance industry failed, such that insurance companies might not be able to make payments to claimants or a large number of claimants, took steps to head off such a crisis.
In 1968, following the riots and brush fires that had occurred earlier in that decade, the California Fair Access to Insurance Requirements – FAIR – Plan was established by the California legislature. FAIR became the state’s insurer of last resort, providing access to fire coverage for California homeowners unable to obtain it from traditional insurance carriers.
The FAIR Plan offered what was essentially minimal coverage at rates that were typically higher than what was charged by underwriters in the insurance industry. Nevertheless, it was a godsend to those homeowners who or businesses which were considered to be too risky to cover by conventional insurers.
Twenty years later, in 1988, California voters enacted Proposition 103, which established consumer protections designed to keep insurance rates fair and affordable and to ensure a competitive marketplace.
The seemingly endless round of catastrophic wildfires in the late 2010s and early 2020s prompted insurers to request that the state suspend or mitigate many of the limitations and restrictions on insurance companies under Proposition 103. When the state – meaning the governor, the legislature and the California insurance commissioner – did not act on those requests, insurance companies initiated major shifts in their business models, including raising rates to the full extent that they could under Proposition 103 and becoming more and more selective about which homes and businesses they would ensure, refusing in some cases to underwrite policies in high-risk fire areas.
In 2022, American International Group notified thousands of homeowners in California that its policies would not be renewed following their 2023 expiration. On May 26, 2023 State Farm General Insurance Company and on June 2, 2023, Allstate, California’s first and fourth largest insurance carriers, respectively, representing over 27 percent of the admitted insurance market in California, announced they would stop or had stopped issuing new homeowners and commercial property insurance policies in California. Simultaneously and since, several other insurance companies, representing an additional 36 percent of the market, announced plans to limit new policy origination.
The Fair Access to Insurance Requirements Plan, which was already under considerable strain, with the increase in fire destruction in recent years found itself really being put to the test beginning in 2019. At that point 160,497 homeowners throughout the state had coverage through FAIR. Applicants asking to be allowed onto the FAIR rolls came in at an alarming rate. Whereas previously, inquiries ran between 10 and 20 per day, Monday through Friday, that number zoomed to around 140 per day, five days per week. Enrollment in the Fair Access to Insurance Requirements Plan jumped to 272,846 homes in 2022. It has continued to rise. The prospect that FAIR will collapse of its own weight if the pattern of intensified and increased wildfires continues is real.
In San Bernardino County, the insurance crisis was most acute in its desert and mountain communities. While fire and its destruction was, and remains, the major complicating factor in this regard, the San Bernardino County Mountain communities – both those in the San Bernardino Mountains/San Bernardino National Forest and in the San Gabriel Mountains/Angeles National Forest were hit with an intense blizzard that lasted from February 21 until March 10, 2023, resulting in and estimated $143 million in damage within the San Bernardino Mountain communities alone and not extending to the damage in the easternmost portion of the San Gabriel Mountains within the area of the Angeles National Forest that lies within San Bernardino County. Many homeowners and property owners in the county’s mountain areas filed insurance claims, further exacerbating the crisis within California’s insurance industry.
Last month, San Bernardino County officials prepared for the San Bernardino County Board of Supervisors’ consideration a resolution that cited Proposition 103, the 2022 and 2023 move by 63 percent of California’s insurance carriers to stop issuing new polices altogether, discontinue existing polices or severely selectively limit the writing of new polices; the negative impact the inability to get insurance coverage is having on homeowners, business owners, and farmers and the ability to secure mortgages, the impact the situation is having on new housing development; and how the evaporation of the traditional insurance industry is destabilizing the California Fair Access to Insurance Requirements Plan and may eventually cause it to collapse, and called upon the California insurance commissioner, the state
legislature, and the governor take emergency action to strengthen and
stabilize California’s marketplace for homeowners and commercial
property insurance.
On Tuesday June 25, 2024, the board considered the resolution and on a motion by Supervisor Curt Hagman, seconded by Supervisor Joe
Baca, Jr., and carried the passage of the resolution unanimously.
The resolution stated that the California Insurance Code, in particular under its sections 1861.01, 1861.05, 1861.055 and 12921.7, gives the state insurance commissioner the reach “to promote the public welfare” and “adopt emergency regulations governing the prior approval process for insurance rate change applications,” an authority further contained in and augmented by section 11346.1 of the California Government Code.
Given that set of circumstances, the resolution called upon the insurance commissioner, state legislature, and the governor “to declare a state of emergency and take immediate emergency regulatory and legislative action to strengthen and stabilize California’s marketplace for homeowners insurance and commercial property insurance. In particular, the resolution asked that the state take action to expand coverage choices for all consumers, particularly in underserved areas; improve the efficiency, speed, and transparency of the California Department of Insurance’s rate approval process; tailor the rate approval process in a way that would promote a competitive insurance marketplace, including revamping how risk and insurer costs are accounted for; ensuring long-term availability of homeowner and commercial property insurance coverage; and maintain the solvency of the FAIR Plan by reducing its share of the overall market in underserved areas by moving the customers it serves into polices offered by traditional insurance underwriters.
The resolution stated the county supervisors’ concerns that draft regulations adopted by the California Insurance Commissioner will not go into effect at least until 2026, the resolution called upon the California Insurance Commission to act at once to redress the worsening insurance crisis.
The resolution had been drafted by what can be referred to as the Rowe Administration. At present,Third District Supervisor Dawn Rowe is the chairwoman of the board of supervisors. Under San Bernardino County’s charter, the chairperson of the board of supervisors has especial powers and authorities, serving with the county chief executive officer in the capacity of the county’s co-regent. In this way, the resolution embodied Rowe’s leadership and philosophy, a direct manifestation of her guidance of the county.
Aside from the rather grandiose expectation that state officials in Sacramento can somehow override the free market and consign the various companies within the state’s insurance industry to operate at nearly non-existent or non-existent profit margin and more likely at a loss and a consistent loss that would put them individually and collectively out of business, the directions contained in the resolution were unrealistic in other ways. The board of supervisors had seemingly forgotten or plain failed to take into consideration the outright enmity it has generated with officialdom – that being the controlling political majority – in the state’s capital.
California for two decades has been a both solidly and increasingly Blue state. The lone exception to that was the governorship of Arnold Schwarzenegger, who came into office as a consequence of the 2003 recall of the once-popular but rapidly disgraced Democrat Grey Davis, who was undone by his mishandling of the state’s energy policy. Despite Schwarzenegger’s technical registration status as a Republican, he actually ran successfully twice as a celebrity.
At present, Democrats hold every one of the state’s major independently elected political posts outside the legislature, from governor to lieutenant governor to attorney general, to treasurer, to controller to superintendent of schools to insurance commissioner. In the Assembly 62 of its 79 members are Democrats against 17 Republicans, while in the 40-member State Senate, 32 are Democrats compared with eight Republicans. Thus, the Democrats have a supermajority in both houses of the legislature.
Throughout the state, there are only six remaining Republican enclaves where the GOP yet holds a majority of that particular area’s elective offices. One of those is San Bernardino County.
Yet, San Bernardino County remains Red against the odds, doing so at least in part because of the aggressive efforts of the party’s county leadership. The number of Democrats in San Bernardino County eclipsed the number of Republicans within its confines in 2009, since which time, the Democratic numerical advantage countywide has continuously grown. Despite that, the Republican Party is far more energetic, organized and coordinated than its Democratic counterpart. Through concentrated fundraising, constant polling and monitoring, and promotional efforts through newspaper advertising, radio spots, television commercials, internet and other social media postings and efforts to get Republicans out to vote both at the polls and by mail, Republicans have remained dominant in San Bernardino County. Four of the five members of the Board of Supervisors are Republicans. Eighteen of the county’s 24 cities and incorporated town councils have more Republican members than Democrats.
San Bernardino County, which against all odds and despite having substantially more Democrat voters than Republican voters, is one of the last bastions of Republicanism in California. Even though there are more Democrats in San Bernardino County than Republicans, San Bernardino County’s Republicans turn out to vote in far greater numbers than do their Democrat counterparts. Four of the county’s five supervisors are Republicans. In 17 of the county’s 24 municipalities, there are more Republicans on the city and town councils than there are Democrats. Put simply, Republican-dominated San Bernardino County is on the outs with Democrat-dominated Sacramento.
San Bernardino County is one of the few counties in the state in which Lara lost in the 2022 election for insurance commissioner. Of the 446,660 total votes cast in that contest in San Bernardino County, Lara captured 217,865 or 48.78 percent. In the 2022 contest, he was outdistanced by the Republican, Robert Howell, who polled 228,795 votes or 51.22 percent. In 2018, he fared even less well against Steve Poizner, who was the last Republican to hold the California Insurance Commissioner post from 2007 until 2011. Poizner was an unsuccessful candidate for governor in 2010, when he failed to capture the Republican nomination, losing to Meg Whitman. Before that, he was unsuccessful in his bid to be elected to the California Assembly as Republican, losing to Democrat Ira Ruskin. In 2018, despite Lara proving victorious in the race for insurance commissioner, he lost in San Bernardino County to Poizner, who had changed his registration to no party affiliation. Of the 513,350 votes cas for insurance commissioner in San Bernardino County that year, Lara received 247678 or 47.08 percent to Poizner’s 271,572 or 52.92 percent.
Another political consideration militating against the board of supervisors’ effort is the consideration that the majority of residents in San Bernardino County’s desert and mountain communities are solidly Republican. Among all of San Bernardino County’s 1,117,683 voters, 472,831 or 40.1 percent are registered as Democrats, while 354,588 or 30.1 percent are registered Republicans. The remaining 29.8 percent are either unaffiliated with any political party or are members of the American Independent, Green, Libertarian, Peace & Freedom or other more obscure parties. In San Bernardino County’s First District, however, which is comprised almost entirely of wide desert expanses, 79,812 or 35.1 percent of the district’s 227,405 total voters are Republicans while 78,036 are Democrats. In San Bernardino County’s Third District, which accounts for more than 90 percent of the county’s mountain communities as well as over a quarter of the county’s desert area, 89,912 or 37.3 percent of the district’s 240,857 total voters are Republicans, not quite fully offset by 80,695 Democrats or 33.5 percent. The largest number of Democrats in the Third District are in the district’s urban valley areas, whereas in the mountain and desert communities, Republicans outnumber Democrats by a ratio of about 11 to 6.5.
One factor – indeed a major one – in the Republicans maintaining an upper hand politically in San Bernardino County despite the superior Democrat voter registration numbers is the manner in which the Republicans have shown a willingness to utilize their control over the machinery of government to perpetuate their hold on it. Put into the simplest of terms, this means old fashioned political patronage, the hiring of political operatives into sinecures, i.e., government jobs that pay decent money while requiring little work or production on the part of the individuals who hold those positions. This allows those workers to engage in political activity to promote the officeholders who hired them or their political allies in the next round of elections.
Rowe made a particularly egregious display of this early in her tenure as supervisor. In 2018, the San Bernardino county Board of Supervisors was composed of three Republicans – Supervisor Hagman, then-Supervisor Robert Lovingood and then-Supervisor Janice Rutherford; and two Democrats, then-Supervisor Josie Gonzales and then-Supervisor James Ramos. Ramos, who had most recently been reelected to the board in 2016, vied, successfully, for the California Assembly in the 2018 election cycle. The board, rather than opting to hold a special election to fill the void that was created by Ramos resigning his position as supervisor to depart to join the legislature in Sacramento, opted to appoint his replacement for the two years that were yet remaining on his term.
Despite Ramos’s wish that the board designate his assistant chief of staff, Chris Carrillo, a Democrat, to take his place, the three Republicans – Hagman, Lovingood and Rutherford – outmuscled the only remaining Democrat on the board – Gonzales – to choose Rowe, a Republican.
Shortly after being sworn in, Rowe hired two GOP dirty tricksters, Matt Knox and Dillon Lesovsky, respectively, as her chief of staff and policy advisor. Knox and Lesovsky had a demonstrated history of working with Republican officeholders as member of their governmental staffs while simultaneously working on those officeholders campaigns, specializing in drafting attack ads against their employers’ political opponents. These attacks would take the form, variously, of mailers, handbills, radio spots, television commercials or newspaper ads.
Rowe’s purpose in hiring Knox and Lesovsky onto her Third District supervisorial staff as government employees paid by the taxpayers was so that they could engage in preparing campaign materials on behalf of selected Republican candidates and causes that Rowe was in favor of while simultaneously preparing political “hit pieces” attacking candidates she opposed.
While utilizing a governmental position or the authority and resources of an elective office to engage in partisan political activity is a crime, which can be prosecuted as a felony, in California, Rowe had no concern that she ran any risk in hiring Knox or Lesovsky, since the individual in San Bernardino County who was in place to enforce that law was District Attorney Jason Anderson, a Republican who was part of the GOP machine benefiting by the arrangements.
Anderson made no effort to prevent Rowe’s office from being used to promote Republicans or Republican causes. It was not until complaints were made to the California Attorney General’s Office, which at that time was held by Democrat Xavier Becerra, that Knox and Lesovsky left Rowe’s office.   For this and similar reasons, Insurance Commissioner Lara and Governor Newsom, who are themselves highly partisan in favor of Democrats, have absolutely no use for Rowe, whom they perceive as a Republican party hack. As such, neither Lara nor Newsom nor the overwhelming majority of Democrats in the California legislature are in any hurry to assist Rowe or her predominantly Republican constituency, particularly as that particular population has consistently voted in opposition to Lara serving as insurance commissioner and showed itself as one of the most supportive groundswells of sentiment in favor of removing Governor Newsom from office. While Newsom managed a victory in San Bernardino County in the 2018 gubernatorial election against John Cox by capturing 276,874 or 51.54 percent of the 537,253 votes for governor cast in the county and in the 2021 recall election prevailed, barely with 288,877 votes or 50.22 percent of the 575,241 votes cast in county against the recall with 286,364 or 49.78 in support of ending his reign as governor, Newsom’s showing in that regard in San Bernardino County was one of the worst in the entire state. In his 2022 run for reelection, he lost in San Bernardino County with 215,391 or 47.39 percent of the 454,500 votes cast to Brian Dahle’s 239,109 votes or 52.51 percent.
To add insult to injury, that same year the four Republican members of the board of supervisors agreed to put a measure on the November ballot asking San Bernardino County residents whether they wanted to secede from California and form their own state. That measure passed with 212,615 or 50.62 percent of the county’s 420,054 voters in favor of leaving the Golden State and 207,438 or 49.38 percent opposed.
With the board of supervisors asking that Lara take action, and quickly, to assist their predominantly Republican constituents, he responded by deflecting the suggestion that he do what they were asking of him by reminding them of what he has already done.
“Since June 1, more than 25 wildfires have raged across California prompting evacuations and threatening our communities,” Lara noted. “I understand the challenges consumers throughout the state are facing and the need for action. The regulatory goals set forth in San Bernardino County’s recent resolution support the ambitious reforms set forth in my Sustainable Insurance Strategy set into motion last September. My Department is moving with all deliberate speed — balancing the urgency of the issue with the need for transparency — on several actions to move forward with the state’s largest insurance reform in 30 years since the passage of Prop. 103 in 1988.”
With a hint of sarcasm, Lara continued, “I appreciate San Bernardino County’s support of our urgent ongoing regulatory work to solve this insurance crisis and stabilize our state’s insurance marketplace in order to benefit and protect consumers while increasing the availability of insurance.”
Next, Lara adopted one of the Republican Party’s major talking points by subtly accusing Rowe and her Republican colleagues of engaging in an effort to hamstring private industry, turning the tables on the board chairwoman by suggesting she and her Republican allies are interfering with insurers’ ability to make a buck.
“We want fair and modern regulations, not overregulation that will ultimately harm consumers,” Lara said, again through a filter of sarcasm intended to outRepublican the Republicans. “To date and up through the end of this year, my department will have completed several regulations, administrative actions, and open public meetings to transform our state’s insurance marketplace that results in more insurance companies returning and expanding in all areas of our state.”
In closing, Lara said, ““We will continue to assist San Bernardino County, and all California counties, as we urgently continue to take on this unprecedented insurance crisis.”
Handed lemons, Rowe sought to squeeze them into lemonade.
“San Bernardino County appreciates Commissioner Lara’s prompt response to our resolution calling for urgent action to provide relief to California property owners being pushed out of the insurance market when they need coverage more than ever, and his acknowledgment that a crisis exists. We and our residents eagerly look forward to the opportunity to review and comment on the commissioner’s proposals and work together as Californians on meaningful and effective solutions. We believe time is of the essence.”
-Mark Gutglueck