- Real estate investor Robert Rivani reportedly spent $27 million buying and renovating a luxury beachfront home in Malibu. After it burned down in the Palisades fire last week, he only expects a $3 million insurance payout.
Real estate investor Robert Rivani spent $27 million buying and renovating a luxury beachfront home on Malibu’s famed “Billionaire’s Beach,” but only expects a fraction of that amount from an insurance payout after it burned down.
According to the Wall Street Journal, he was planning to list the five-bedroom mansion this spring for $40 million after buying it for $19.55 million in 2022. But the Palisades fire destroyed it last week.
“What value do you put on an entire community where the land is burnt to a crisp, where you don’t have restaurants or grocery stores, gas stations or working power?” he told the Journal.
The Palisades fire has burned about 23,700 acres, and officials estimate 5,300 structures, many of which are expensive homes, have been damaged or destroyed. So far, eight deaths from that blaze have been confirmed.
Rivani said no insurance company would cover the Malibu mansion for its full value, forcing him to turn to California’s insurer of last resort. But the state’s FAIR Plan coverage for residential policyholders maxes out at just $3 million.
In addition, he told the Journal that he expects to make mortgage and property tax payments that together will exceed $100,000 per month—despite the fact that the house is gone. (Homeowners affected by the fires can qualify for temporary relief on mortgage payments and property taxes.)
“We pay hundreds of thousands of dollars in property taxes a year and yet we don’t have working fire hydrants? It’s mind-blowing,” Rivani said.
Gav. Gavin Newsom has called for an investigation into the fire hydrants. Los Angeles Mayor Karen Bass denied the city was unprepared, attributing the fires to strong winds and a severe drought.
The municipal water system was built to fight fires that engulf single homes, not entire neighborhoods. So while the city overall has enough water, the infrastructure was unable to supply sufficient amounts quickly enough to the needed areas at the time.
Rivani didn’t immediately provide a comment.
The massive wildfires that hit Pacific Palisades, Malibu, and Altadena have burnt 12,000 structures, and AccuWeather has put damages at $135 billion to $150 billion, making it one of the worst wildfires in modern U.S. history. The overall confirmed death toll is up to 25.
The disaster has also highlighted how fragile California’s insurance market had become after other disasters ravaged the state in recent years.
Carriers have been pulling back from California after previous fires wiped out profits. In fact, State Farm dropped nearly 70% of its policies in Pacific Palisades last year.
With nowhere else to go, many homeowners turned to the FAIR Plan for coverage. As of September, FAIR’s exposure to residences was $458 billion, up 61% from a year earlier. That includes nearly $6 billion worth of property that FAIR was insuring in Pacific Palisades alone at that time.
FAIR has maintained that it can pay out policyholders’ claims, noting that state law says it can tap primary insurers to recoup its costs. That’s likely to get passed on to customers.
State regulators are trying to tilt the market back toward private insurers. Just days before the fires flared up, California announced a new regulation that was meant to help homeowners in risky areas obtain more access to insurance.
The rule, which goes into effect later this month, requires carriers to offer coverage in wildfire-prone regions over time, specifically, by 5% every two years until they reach at least 85% of their statewide market share.
In return, insurers can incorporate reinsurance costs in their calculations for what they will charge consumers.
Advocacy group Consumer Watchdog warned that the new regulation could allow insurance companies to hike rates on homeowners by 40% to 50%—without significantly boosting coverage for high-risk regions. But the state’s insurance commissioner has disputed those estimates.
More on the Los Angeles wildfires:
- California wildfires raise alarm on water-guzzling AI like ChatGPT
- Homeowners in California could pay a surcharge of $1,000 or more if FAIR Plan runs dry
- Claims about a billionaire couple hurting efforts to fight the L.A. fires via their ‘control’ of the water supply are false
- Son and father-in-law fleeing fire couldn’t get a ride from Uber or 911, then kind strangers stepped in to save them—twice
