Natural Hazards in Oakland and the Insurance Costs Due to Them

Wildfires and earthquakes are double-barreled natural hazards that drive up the cost of homeowners insurance in Oakland, which has seen its share of damage from both. Two major natural disasters struck this vibrant, sought-after city on San Francisco Bay in years past: a fearsome 1991 firestorm and the 6.9 magnitude Loma Prieta Earthquake.

In recent years, homeowners insurance has become increasingly expensive and hard to obtain in Oakland because of the continuing risk of wildfires. Because Oakland stands atop the Hayward fault, which scientists believe is probably the most dangerous of the active faults in the Bay Area, prudent property owners face the added cost of purchasing earthquake coverage.

Oakland natural disasters and insurance costs

The Oakland firestorm of 1991

Wildfires are a perennial threat throughout Northern California, with no respite expected this year. The National Interagency Fire Center predicts the area’s significant wildland fire potential will be above normal in summer 2022, and drought conditions are likely to intensify.

Residents have seen the terrible destruction wildfires can unleash in urban areas. Many remember the Oakland firestorm of 1991, which caused 25 deaths, destroyed 2,843 single-family homes and 433 apartment units, and burned 1,520 acres of land. Losses from property damage were estimated at $1.5 billion — the equivalent of $3.2 billion in present-day dollars.

Oakland Fire Battalion Chief James Riley, who was commanding a division of firefighters, and Oakland Police Officer John Grubensky both died while trying to help residents evacuate to safe ground during the firestorm.

The California Department of Forestry and Fire Protection’s official name for the firestorm was the Tunnel Fire. It should not be confused with the Tunnel Fire of 2022 outside Flagstaff, Arizona. The Oakland firestorm ranked as the worst fire in California history at the time of occurrence, the New York Times reported on October 22, 1991.

Diablo winds and 100-foot flames

This disaster, also known as the East Bay Hills Fire, occurred on Sunday, October 20 of that year. The fire broke out in a box canyon above State Highway 24 near the entrance to the Caldecott Tunnel. Underbrush that was tinder-dry after five years of drought covered this steep, densely wooded area dotted with homes on narrow streets.

According to an account by Captain Donald R. Parker of the Oakland Office of Fire Services, eyewitnesses said the firestorm started when a single ember from a hot spot from a previous day’s fire blew out of the burn area into a tree. The tree exploded and ignited an inferno that soon overcame firefighters.

The danger was exacerbated by 65-mile-per-hour Diablo winds, a Bay Area phenomenon named after Contra Costa County’s Mount Diablo. Flames as hot as 2,000 degrees Fahrenheit rose 100 feet in the air. Upscale homes with views of San Francisco Bay were reduced to ashes. When it reached its full momentum, the fire destroyed homes at the rate of roughly one every 11 seconds.

Higher premiums for less coverage

One legacy of the firestorm is costly homeowners insurance for area residents. In recent years, some Oakland Hills property owners have had their policies canceled because of the continuing threat of wildfires. When finding new policies from other insurance companies, their premiums were 30% higher for less coverage, ABC 7 News reported.

An insurer canceled Oakland Hills resident Dan Grassetti’s homeowner policy because of a fire hazard due to overgrown brush, The Oaklandside, a nonprofit news site, reported in 2021. The brush was growing on a vacant lot across the street from his property, which had just passed a city wildfire safety inspection.

Grassetti, who is the founder of the environmental organization Hills Conservation Network, appealed the cancellation. The insurance company reinstated his policy, but the insurer was within its legal rights to base its decision about Grassetti’s coverage on the neighboring property’s condition, a consultant with advocacy group United Policyholders told The Oaklandside.

The news site recommends several steps Oakland Hills residents can take to ensure their homes are adequately insured.

  • Buy enough homeowners insurance to cover the cost of rebuilding in the event of a wildfire

  • Consider getting replacement-cost homeowners insurance, which is more expensive than actual cash value homeowners insurance but provides more complete coverage

  • Increase the limits of your additional living expenses coverage, which is part of your homeowners' policy

Fire safety inspections

Much of the Oakland Hills area is situated in a state-designated Very High Fire Hazard Severity Zone. The city of Oakland has landscaping compliance standards homeowners must comply with to reduce the likelihood of wildfires spreading across their yards. The Oakland Fire Department conducts annual property inspections to ensure homeowners comply with these standards. Here are five of the steps homeowners must take to pass these inspections:

  • Create a so-called defensible space by cutting or removing grass, small shrubs, dead leaves, and branches — in other words, ground fuels — from a 30-foot area around all the buildings on the property

  • Keep trees in the defensible space limbed up six feet above the ground, or one-quarter of the trees’ height, to eliminate so-called ladder fuels that would enable fire to move from the ground into the crowns of the trees

  • Prune tree crowns to create a minimum horizontal clearance of 10 feet between the trees and the buildings on the property

  • Remove dead leaves and pine needles from roofs and gutters

  • Clear brush and non-fire-resistant vegetation that’s growing within 10 feet of roadways’ and driveways’ edges

Fire risk analysis

Oakland homeowners’ compliance with these vegetation management standards matters to California insurers. The presence of fuel — namely grass, trees, and brush that could feed a fire — is one of the three factors considered by the risk analysis system that insurance companies use, called FireLine. The company that created FireLine is Verisk.

Oakland homeowners can’t control the other two factors FireLine considers in assessing potential fire risks to properties. These factors are slope — is the property set on a hillside, and if so, how steep is it? — and road access — are the streets narrow and winding, which would slow down fire trucks on the way to a conflagration?

The Loma Prieta Earthquake of 1989

Photo Courtesy of Loma Prieta Earthquake

Oakland’s other dire natural disaster was the magnitude 6.9 Loma Prieta Earthquake, which occurred on October 17, 1989. The San Francisco-Oakland Earthquake, as it’s also called, killed 63 people in Northern California, including 42 who died in Oakland because the top deck of the Nimitz Freeway’s double-decker Cypress Street Viaduct collapsed. A section of the San Francisco-Oakland Bay Bridge also collapsed, causing one fatality.

The earthquake ruptured a 40-kilometer segment of the San Andreas fault and resulted in approximately 3,700 injuries. It was the strongest quake to hit the Bay Area since the Great San Francisco Earthquake of 1906.

According to the Public Policy Institute of California, the Loma Prieta Earthquake caused approximately $7.4 billion in capital losses in four sectors: residential property, other private property, transit, and public facilities. That’s the equivalent of $17.35 billion in present-day dollars.

About 11,500 housing units were destroyed or severely damaged, 40% of them single-family homes and 60% multi-family structures. Downtown Oakland was one of the areas that suffered the worst residential damage. The other areas were in San Francisco, Santa Cruz, and Watsonville.

Earthquake insurance and flood insurance go hand in hand

Earthquakes remain a constant threat in Oakland. The U.S. Geological Survey says there is a 72% probability that a 6.7 magnitude earthquake will occur in the Bay Area in the next 30 years. Oakland sits directly atop the Hayward Fault, which scientists refer to as a tectonic time bomb.

Homeowner policies do not cover earthquakes, and mortgage lenders do not require property owners to have earthquake coverage. Property owners who want earthquake insurance must buy separate coverage. They should also buy flood insurance. Earthquake insurance does not cover damage that occurs outside homes because of sewer or drain back-ups, floods, or tsunamis triggered by an earthquake. Nor does standard homeowners insurance.

Seismic retrofits

The California Earthquake Authority provides two-thirds of the residential earthquake insurance policies sold in the state. This not-for-profit, publicly managed, but privately funded organization was created by state law after the 6.7 magnitude Northridge Earthquake, which occurred 20 miles from downtown Los Angeles in 1994. CEA sells its policies through participating insurance companies.

A 2.9% rate increase in CEA earthquake insurance premiums took effect in spring 2022. The California Department of Insurance approved this rise several months earlier. In addition to this rate hike, policyholders are also seeing increases in their premiums if their house reconstruction rates have risen and driven up their coverage limits.

People who own houses built before 1980 can qualify for CEA earthquake insurance premium discounts of up to 25% — and make their homes less danger-prone — by doing seismic retrofits. A civil or structural engineer or a licensed contractor must verify that the work has been completed according to state standards. Seismic retrofits include bolting houses to their foundations and bracing cripple walls, which are the short walls that stand on a house’s  foundation and support the floor and exterior walls.

Help for Oakland homebuyers

If you’re buying Oakland real estate, you need to be savvy about purchasing homeowners insurance that fully protects you from the threat of losses from future wildfires and earthquakes. Trusted realtor Cynthia Speers is knowledgeable about all the nuances of homebuying in Oakland and can guide you through every detail of the process, including determining what homeowners coverage is right for you. Contact Cynthia today.

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