Many restaurants, shops and community landmarks are among the 12,300 structures destroyed by the flames that continue to burn in Los Angeles. Many of their owners are already filing insurance claims — joining a growing number of entrepreneurs across the country who are discovering just how far their coverage goes after weather-related disasters.
“We’re just in this limbo until the adjusters go and see what’s gone,” said Paul Rosenbluh, co-owner and operator of Fox’s Restaurant, an Altadena restaurant that was consumed in the Eaton Fire.
There will be many businesses that thought they had more [coverage] than they have.
Douglas Heller, director of insurance, Consumer Federation of America
Rosenbluh told NBC News days after the fire that he’s not sure he can rebuild in the area. But once the property losses are tallied, he hopes his insurer’s response will be as simple as, “There you go, thanks, good luck moving forward,” he said Thursday. Its coverage includes property insurance as well as general liability insurance, which usually covers financial losses from a variety of causes.
Many small business owners may face a harsher reality, experts warn.
“I can say with confidence: there will be many businesses that thought they had more [coverage] than they have,” said Douglas Heller, director of insurance for the Consumer Federation of America, an advocacy group.
The insurance crisis unfolding across California is mirrored in many places around the country, Heller said. Business owners are increasingly faced with an array of expensive coverages and overtaxed government programs trying to fill some of the gaps, ultimately leaving many policyholders holding the bag.
“The risk is increasing and nobody wants that,” he said.
Rosenbluh and other fire victims may have reason for optimism because fire damage is typically covered on many business owners’ policies. But entrepreneurs who have recently faced various types of adversity have not been so lucky.
After Hurricane Helene ripped through western North Carolina in October, Erin Smith, who owns Humanité Boutique in Bryson City, said she was forced to close for eight days after 2 inches of water flooded her women’s clothing store. Her small business policy included general liability coverage, but she said she was shocked when her carrier informed her it didn’t include business interruption. For that, she would need flood insurance — which she didn’t realize when she signed up.
“That was my first flood,” Smith said. “No one had flood insurance.”
In an annual Allianz survey of businesses, insurance agents and risk consultants that the financial firm released this month, climate change jumped from number 7 last year to number 5 among top concerns for 2025 – its highest ranking yet. in the 14-year survey. history. There were 27 natural disasters that cost at least $1 billion nationwide in 2024, according to the National Oceanic and Atmospheric Administration, second only to the 28 recorded in 2023.
This was my first flood. No one had flood insurance.
Erin Smith, owner of Humanité Boutique, Bryson City, NC
Meanwhile, many small business owners are paying more for policies they don’t fully understand. Premiums increased for 36% of carriers last year, JD Power found — up from the 34% that saw increases in 2023 — and over half of those increases were initiated by carriers. Nearly three-quarters of small businesses surveyed by insurer Hiscox in 2023 said they did not know what a business owner’s policy typically covered, while 83% could not accurately describe general liability coverage.
“There are many businesses, as well as many homeowners, who are caught off guard after disaster strikes,” Heller said. “There might have been a broker who, four years ago, said to them, ‘Oh, you know, you could save some money if you just get rid of this.’
Smith is the first to admit that the fine print of business insurance is “not my expertise.” However, she wishes her carrier had better communicated her options and plan details.
Although Smith’s boutique is up and running again, she learned this month that the floor may need to be completely replaced — potentially costing $30,000 on top of the thousands caused by surface water damage, she said.
During her search for other lifelines, the Federal Emergency Management Agency directed her to apply for an economic disaster loan, or “EIDL,” which provides eligible businesses with up to $2 million in working capital after catastrophic events , plus one year of deferred payments. But Smith said she is still paying back the previous EIDL debt she accrued during the pandemic.
“I can’t. It just doesn’t work for me,” she said. “Fingers crossed it’ll be fine.”
Isaac Herrin, also in Bryson City, faced a similar dilemma when Helene destroyed over $20,000 worth of inventory at his retail store, Selah Collection. Herrin, who rents the space, said he was paying for business contents insurance, a type of coverage that repairs or replaces assets. But he said his request was denied because the store owner did not have flood insurance.
“I went back and tried to argue” with the carrier, he said. “This is more than a flood – we got hit with a hurricane in the mountains!”
Before Helene ravaged the region, insurers viewed western North Carolina as relatively low risk. Then, a Reuters analysis of federal data found that only 1 in 200 single-family homes in the inland area were covered by the National Flood Insurance Program, despite its proximity to the Tuckasegee River, which is becoming more prone to flooding as rain storms increase more frequently.
At least a quarter of flood claims come from undesignated flood zones, said Janet Ruiz, a spokeswoman for the Insurance Information Institute, an industry group. Extreme winter weather increases that number, too—frozen ground doesn’t absorb water, increasing the chance of flash floods.
“Hurricane areas are only a small part of the flood,” she said.
Heller said small business owners need a comprehensive federal alternative to the piecemeal options currently out there. The NFIP, which covers commercial buildings and property up to $500,000 per policy type, has come under scrutiny recently. Like California’s FAIR program, it has been crippled by increasingly volatile weather. It currently owes the US government more than $20 billion and is exceeding its $30 billion borrowing limit. Its coverage also does not include financial losses caused by business interruption.
Project 2025, the Republican policy plan President-elect Donald Trump has denied despite his transition team using the initiative for personnel purposes, recommends privatizing the NFIP, putting advocates on the lookout as Trump takes office on Monday. A spokesman for the Trump transition team did not immediately respond to a request for comment.
Heller pointed to the Insurance Act, a bill introduced by Rep. Adam Schiff, D-Calif., last year as a model that would effectively insure insurers by incentivizing them to take on more risk and preventing them from pulling out of disaster-prone areas. The bill has seen little movement in Congress, however, and is not expected to gain traction amid the upcoming power change in Washington.
“We need to make sure that the government is working for businesses by making sure that those products are real, good quality and reasonably priced so that [insurers] can take on that risk,” Heller said. As limited as oversight of the homeowners insurance market is by the regulators who are supposed to protect us, the less it is for businesses.
