The U.S. Constitution was not designed to require one state to subsidize the mismanagement and liabilities of another state. That includes natural disasters that were caused by or could have been prevented by, the offending state’s governments.
But that’s the situation that Florida and the rest of the states face with California’s inept governmental policies that invited the devastating Los Angeles wildfires. Efforts are afoot to request federal programs to cover wildfire losses. However, California is a rich state with a huge population. Why should Palm Beach County and Florida taxpayers pay to rebuild expensive mansions near the California coast?
Yes, reasonable Americans would probably be willing to help the unfortunate California residents. But it’s also reasonable to expect their state and local governments to legally pledge to correct their ineffective California land management policies, unsuccessful fire insurance pricing, regulatory models, and failed forestry and water laws. Floridians don’t need to be on the hook for future disasters that could be prevented by laws and policies that work.
California likes to boast that it is the wealthiest state, and its economy ranks fifth internationally, behind the U.S., China, Germany, and Japan. Fine. So, clean up your own mess and pay for your own liabilities.
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States have regulatory authority over insurance matters. However, some states, like Florida, have done effective work to manage their insurance market, while other states, like California, have not. California’s policies have made it easier for wildfires to start, harder to contain, and difficult to extinguish. The state’s land management policies are dismal, don’t work, and have ballooned insurance claims and liabilities for insurers. When the carriers pulled out, California lawmakers should have seen the handwriting on the wall and implemented better laws to manage forestry and fire outbreaks. Liberal insurance commissioners suppressed insurance rates for many years. When insurance companies are prohibited from making money, they drop policyholders and/or leave the market. And when California caps reinsurance costs that carriers can pass along or rejects requests for rate increases so that there’s not enough revenue to cover insurer liabilities, insurance companies flee the state.
On the other hand, Florida passed legislation from 2019 to 2024 to head off their insurance crisis caused primarily by litigation abuse and “assignment of benefits” claims; these claims permitted policyholders to assign their claim benefits to contractors working in league with plaintiff trial attorneys. The contractor would then jack up charges and puff up claims so the trial attorneys could sue insurers, claim-by-claim, and take them to court if they didn’t pay.
The Wall Street Journal reported that “(Florida) insurers lost hundreds of millions of dollars a year and more than a dozen companies failed,” which prompted Florida’s tort reforms that “stanched the flood of frivolous lawsuits, (and) stabilized the market,” resulting in nine more insurers that have since entered the market. And six out of 10 major carriers have now elected to increase their business in Florida.
In conjunction with any financial assistance that the federal government doles out of California for the fire disasters, the Feds are entitled to require California lawmakers and policymakers to 1) act to stabilize the state’s property insurance market, 2) stop damming up rivers and lakes and to create more water reservoirs rather than shunting tens of millions of gallons of rain runoff and river water to the Pacific Ocean, 3) propose legislation to focus on reducing insurance fraud and stopping fat-cat lawyers from lining their pockets, 4) maintain sufficient reinsurance funding, and 5) grant funding to homeowners seeking to make their properties more resistant to the damages of fire outbreaks.
California, the ball is in your court. If your governments do what’s right, Californians will receive federal assistance.
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