Insurance crisis hits local small businesses in Northern California

In 2019, Bryce Skolfield and his partner purchased a converted turn-of-the-century ranch in Guerneville and opened the Mine + Farm Inn. Moving to a new location and starting in a new industry, “we had concerns and fears,” Skolfield said. But “insurance was not on our mind. … This turned out to be our biggest challenge.

Initially, getting insurance wasn't a problem, but every year the inn's policy is dropped instead of renewed, even with no previous claims. And, each time, the couple is forced to return to a market with fewer options, less coverage and higher prices.

Over the past four years, Skolfield said the company's insurance costs have increased more than 200 percent. This expense absorbs more than 10% of the inn's gross receipts, more than double what would be usual. Skolfield had to forgo updates and expansions to the property, adjust room rates and examine staff.

“We haven't even been able to pay ourselves as owners because everything has to be reinvested into the business just to cover these exorbitant cost increases,” Skolfield said.

As California's insurance crisis intensifies, the focus has shifted to homeowners, but local businesses are also feeling the effects. Major insurers, from Allstate to Farmers to USAA, are limiting their coverage or pulling out of the state altogether because of climate change-related wildfire risk. As a result, some companies have seen the costs of all types of required policies skyrocket as the insurance market becomes less competitive. As businesses are forced to make difficult choices under the weight of skyrocketing costs, the consequences also fall on workers and consumers.

“I'm not sure a lot of small, independent businesses will be able to survive another year like this,” Skolfield said. “This could be very bad for the local economy in many ways. »

Joe Bartolomei, owner of the Farmhouse Inn in Forestville, said that in his role on the Sonoma County Hospitality Association board, rising insurance costs have become “all we hear about.”

“It’s a big burden for small businesses to bear,” he said. “Even in good times, the margins aren’t that big.”

Already, the local tourism and hospitality industry on which the region relies heavily has faced biblical-level setbacks in the form of devastating wildfires, winter storms and the COVID-19 pandemic. Some fear that even if big companies manage to get by, many smaller operators who embody the region's charm and character could be driven out.

“Little moms and dads provide a truly intimate, unique and authentic experience,” Bartolomei said, “they’re the ones who get the most rush.”

Personally, Bartolomei said he saw his general liability insurance for the Farmhouse Inn property go from roughly $70,000 a year to nearly $400,000. Unable to obtain an insurance policy from major insurers, Bartolomei has had to turn to the largely unregulated secondary market, where costs skyrocket for less desirable coverage.

“It’s incredibly frustrating, it’s stressful, it’s expensive,” he said, “and I feel like it’s not getting any better.” I feel like every year the situation only gets worse.

With coverage increasingly tenuous, Bartolomei said he would think twice before filing any claims, something he has only done once in 23 years in business – during the floods in the region in 2019. “If I make a claim, I'll probably get canceled immediately, so you won't even want to touch it,” he said. “It doesn’t feel good to pay for something you’re never going to do.” Basically, you only have it if there is a catastrophic event that completely destroys your property, and then you hope you have enough to rebuild.

In its 12 years in business, Glen Ellen Star, a popular neighborhood restaurant in the Sonoma Valley, has overcome some obstacles: a few fires in the area followed by a pandemic. But it's the insurance costs that chef-owner Ari Weiswasser has had to deal with most recently. After being offered a three-fold increase in the price of general liability insurance and umbrella insurance for less coverage, he decided to forgo the latter, hoping that general liability would be sufficient if anything was coming.

“Do we really want to triple our insurance at a lower cost? » said Weiswasser. “So we’re playing a little bit here.”

It's frustrating, because as insurance costs steadily rise, the inevitable result is rising menu prices — “you can only absorb so much,” Weiswasser said — but “then at the end of the year Year, you look at the (profits and losses), and you don't make more. You pay more money.