Among the 12,300 buildings destroyed in the still-raging fire in Los Angeles are numerous eateries, retail establishments, and local attractions. After weather-related disasters, several of their owners have already filed insurance claims, joining an increasing number of business owners nationwide who are learning the extent of their coverage.
Paul Rosenbluh, co-owner and operator of Fox’s Restaurant, an Altadena diner that was destroyed in the Eaton Fire, stated, “We’re just kind of in this limbo until the adjusters can go and see what’s not there anymore.”
Many companies will believe they have more [coverage] than they actually have.
Douglas Heller, the Consumer Federation of America’s director of insurance
Days after the fire, Rosenbluh told NBC News that he wasn’t sure he could rebuild in the region. However, after the property’s damages are taken into consideration, he expects his insurer would say something like, “Here you go, thanks, good luck moving on,” on Thursday. In addition to general liability insurance, which normally covers monetary damages from a variety of sources, he is covered by property insurance.
Experts caution that many small business owners may have to deal with a more difficult reality.
Douglas Heller, head of insurance for the advocacy group Consumer Federation of America, stated with confidence: “There will be a lot of businesses that thought they had more [coverage] than they have.”
According to Heller, numerous locations around the country are experiencing the same insurance crisis as California. In the end, many policyholders are left holding the bag as business owners deal with a hodgepodge of costly coverage and overburdened government programs that struggle to fill some of the gaps.
He claimed that risk is rising and that no one wants it.
Given that many business owners’ policies cover fire damage, Rosenbluh and other wildfire victims may have cause for optimism. However, business owners who have recently survived various calamities have not been as lucky.
Erin Smith, the owner of Humanit Boutique in Bryson City, said she had to close her women’s clothing store for eight days after Hurricane Helene passed through western North Carolina in October because two inches of water had filled it. She said that although general liability coverage was part of her small company insurance, she was taken aback when her carrier told her that it did not cover disruption of operation. She would have needed flood insurance for it, but she was unaware of this when she signed up.
Smith claimed that this was his first flood. Nobody was insured against floods.
Climate change rose from seventh place last year to fifth place among the top concerns for 2025, the highest rating in the study’s 14-year history, according to an annual Allianz survey of businesses, insurance brokers, and risk consultants that the financial company issued this month. According to the National Oceanic and Atmospheric Administration, there were 27 natural disasters in 2024 that cost at least $1 billion nationwide, second only to the 28 that occurred in 2023.
My first flood was this one. Nobody was insured against floods.
Humanit Boutique in Bryson City, North Carolina, is owned by Erin Smith.
Many small business owners, however, are paying extra for plans that they don’t completely comprehend. According to J.D. Power, 36% of entrepreneurs witnessed premium increases last year, which is greater than the 34% who experienced increases in 2023. Carriers were responsible for more over half of those increases. 83% of small businesses questioned by the insurer Hiscoxin 2023 were unable to adequately explain general liability coverage, and over three-quarters of them stated they were unaware of what a business owner’s insurance normally covered.
Like many households, many businesses are taken aback when the disaster occurs, according to Heller. Four years ago, a broker could have told them, “Oh, you know, if you just get rid of this, you can save a little money.”
Smith is the first to acknowledge that I am not an expert in the nuances of company insurance. She does, however, wish her carrier had explained her options and plan details more clearly.
Smith’s shop is back in operation, but this month she discovered that the flooring could need to be replaced entirely, which might cost $30,000 in addition to the thousands she had already spent on superficial water damage, she said.
The Federal Emergency Management Agency advised her to apply for an economic injury disaster loan, or EIDL, while she was looking for other lifelines. EIDLs give qualified firms up to $2 million in working cash following catastrophic occurrences, along with a year of deferred payments. Smith, however, stated that she is still making payments on previous EIDL debt that she incurred during the pandemic.
I am unable to. She remarked, “That just doesn’t work for me.” Hopefully, everything will work out.
Helene’s destruction of more than $20,000 worth of inventory in Isaac Herrin’s retail store, Selah Collection, in Bryson City presented a similar predicament. The space’s renter, Herrin, stated that he was paying for business contents insurance, which covers things like asset replacement or repair. However, he claimed that because the shop’s landlord lacked flood insurance, his claim was rejected.
I tried to argue with the carrier when I returned, he said. There is more to this than just flooding—a hurricane struck the mountains!
Insurers considered western North Carolina to be relatively low-risk before to Helene’s devastating impact on the area. However, despite the inland area’s closeness to the Tuckasegee River, which is becoming more flood-prone as rainstorms get more regular, only 1 in 200 single-family homes were covered by the National Flood Insurance Program, according to a Reuters study of federal statistics.
According to Janet Ruiz, a spokesman for the Insurance Information Institute, an industry association, at least 25% of flood claims come from non-flood-designated locations. Because well-frozen ground does not absorb water, extreme winter weather increases the likelihood of flash floods.
According to her, hurricane zones are just a tiny portion of the flood.
According to Heller, small business owners require a comprehensive government alternative to the fragmented options that are currently available. Recently, the NFIP has come under fire for its coverage of commercial buildings and property up to $500,000 for each type of policy. Similar to California’s FAIR program, it has been overburdened by the state’s more unpredictable weather. It is rapidly approaching its $30 billion borrowing limit and owes the US government more than $20 billion. Additionally, monetary damages brought on by business interruption are not covered.
Despite his transition team using the initiative for personnel, President-elect Donald Trump has disavowed Project 2025, the Republican policy framework, which calls for privatizing the NFIP and placing proponents under watch once Trump into office on Monday. A request for comment was not immediately answered by a representative of the Trump transition team.
Heller cited the Insure Act, a bill that was proposed last year by then-Rep. Adam Schiff, D-Calif., as an example of a model that would successfully insure the insurers, preventing them from withdrawing out of disaster-prone areas and encouraging them to take on greater risk. However, the bill hasn’t gotten much support in Congress and isn’t anticipated to do so when Washington’s power structure changes.
In order for [insurers] to accept that risk, we must ensure that the government is working for businesses by ensuring that those goods are authentic, high-quality, and fairly priced, said Heller. The authorities who are meant to protect us have very little control over the homeowners insurance market, and this is much less true for businesses.