Ten Activities State Farm Considers Too Risky To Insure

Rate Hikes and Stricter Insurance Rules in California

State Farm continues to dramatically revise its underwriting policies in the face of rising insurance costs and increased risk of natural catastrophes. The company has filed for a 39% rate increase for its 2024 Personal Liability Umbrella program, which provides additional liability coverage beyond what is included in basic policies. If approved by the regulator, this increase will take effect on August 1, 2025.

Additionally, State Farm has introduced strict new criteria to determine who is considered too risky to insure. Policies may now be non-renewed, even if the customer was previously insured. These changes will affect all current customers when they renew their policies in 2025–2026.

Why it Matters?

As previously reported in the San Francisco Chronicle, State Farm is turning away new customers and not renewing old policies en masse. This is due to a severe crisis in the state’s homeowners insurance system, namely:

• Catastrophic losses
• Inflation
• Lawsuits
• Restrictive regulations

These factors are forcing insurers to either raise rates or reduce coverage. Janet Ruiz of the Insurance Information Institute explained that clarifying underwriting criteria is a standard way for insurers to reduce risk. However, State Farm’s list of “unacceptable” activities caused a major uproar.

What is the Personal Liability Umbrella program?

The Personal Liability Umbrella program provides coverage of up to $1 million for various claims and lawsuits, including:

• Injuries on the insured’s premises
• Car accidents involving bodily injury
• Claims for slander, defamation, and invasion of privacy

For most customers, the maximum liability limit is typically capped at $10 million unless they previously had a higher limit. As of May 2023, the company stopped accepting new applications for this program, so the new terms only apply to renewals.

Ten Activities Deemed Uninsurable by State Farm

1. Providing childcare for more than six children. Commercially providing childcare in the home is grounds for denial.
2. Having public notoriety or an unfavorable reputation. If a person is known to the general public and negative information has been disseminated about them, this may be grounds for denial.
3. Ownership of real property outside the continental United States. The client is considered inadmissible even if the property is in Alaska or Hawaii.
4. Raising hogs on a farm. Farms that raise hogs are considered higher risk.
5. Commercial kennels on farms. The presence of dog kennels automatically results in rejection.
6. Host children’s activities on the farm for a fee. Activities such as corn mazes, and hayrides increase the farmer’s responsibilities.
7. Treating crops with aerial equipment. Using aircraft for spraying or seeding also poses risks.
8. Access to pick-your-own farms. Insurance companies often consider farms that allow the public to pick produce on their property too unsafe to cover.
9. Shared farm ownership with non-relatives. Shared farm ownership between non-relatives may result in a denial.
10. Hunting and hunter accommodations. Providing lodging for hunters or having employees accompany hunters will also result in a denial.

Potential Consequences for Policyholders

Customers who engage in the above activities may be denied policy renewal, and this is especially important for:

• Owners of real estate and farms
• Well-known personalities
• Small home-based businesses

Additionally, the 39% rate increase will be added to the existing 29% increase that took effect in March. Thus, the total insurance cost will increase by nearly 80% over two years.

Possible Legal Strategies for Discriminatory Selection Criteria

Some of the new underwriting criteria may be considered discriminatory or overly generalized. This is particularly true concerning public figures or owners of specific properties. For instance, refusing to renew a policy based on negative media coverage could be challenged as a breach of good faith and equality principles. If a client believes that the basis for denial of coverage was biased or unclear, they may file a complaint with the California Department of Insurance (CDI). In some cases, it is also possible to take legal action against the insurer for breach of contract or insurance bad faith.

Additionally, policyholders may request a written explanation from insurers regarding the reasons for the denial and use that explanation as the basis for a legal evaluation. KAASS LAW lawyers can help draft the request, analyze the reasons for refusal, and initiate legal proceedings if necessary.

How to Protect Your Interests?

With underwriting standards tightening and the cost of policies rising in California, policyholders should take the following steps:

• Consult with an attorney regarding renewal rights or appealing a denial
• Explore the possibility of switching to another insurer
• Reevaluate their business in terms of insurance risks

How KAASS LAW Can Help?

With tightening underwriting and rising rates in California, there is an increased risk of policy renewals and payouts being denied. KAASS LAW provides skilled assistance in the following situations:

1. Challenging a policy renewal denial. If the insurance company refuses to renew your policy without sufficient reason, our lawyers can help you understand the situation and take the necessary steps to protect your rights. To learn more about your rights if your policy is denied renewal, see our article “Breach of Covenant of Good Faith in California.”
2. Defenses to an Insurance Claim Denial. If an insurance company denies a claim for an insured event, we are prepared to represent you and seek fair compensation.
3. Insurance issue consultations. Our specialists will provide detailed advice on insurance matters. Learn more about unfair insurance company practices in the article “What is Insurance Bad Faith in California?“

Conclusion

California’s insurance market continues to shift toward higher rates and reduced coverage for high-risk categories. State Farm policies emphasize the importance of customers being legally aware of their rights and responsibilities. Contact us if you believe the insurance company unfairly refused to renew your policy or violated your rights. Call 844-522-7752 for a free consultation.