Insurance companies decline coverage in some areas of Montana, report says state should adopt WUI zoning

As wildfires dot the Western landscape, and a popular, historic Hawai’ian town is overrun by flames, a recent report about wildfires and zoning may become even more critical.

Headwaters Economics released this spring “Building for Wildfire in Montana: Protecting Communities with Statewide Wildfire Safety Standards.” This week, Montana’s Commissioner of Securities and Insurance issued a warning about insurance companies declining some coverage in Montana because of fire.

Currently, Montana has no statewide zoning and building standards specifically tailored for residential structures in forest areas. Often referred to as “WUI,” wildland-urban interface zoning seeks to minimize harm done by fire to property and people living at the intersection of development and wild land.

For myriad reasons, these areas are the focus of study because they are often expensive land, located in remote areas with limited roads for firefighting forces and limited water supply. Many folks move to these locations for luxury, travel or even in retirement, looking for their own little piece of Montana wild.

Yet, when wildfire strikes, these particular areas are vulnerable to being overrun by the blaze, leading to huge losses for residents and insurers.

On Monday, Montana Insurance Commissioner Troy Downing reported that some insurance companies have begun to refuse to write policies or increase coverage amounts in Montana due to fire. Downing’s office stressed that while insurance companies can raise rates or refuse coverage, they must do so only when the risk is justifiable.

For example, Downing’s office has received complaints where the fire risk isn’t substantially different than in the past, even with climate change.

“Many of these complaints have come from areas which are not threatened by wildfires, including areas within city limits of many developed cities and towns,” Downing said. “For example, we are aware that some insurers are refusing to offer coverage for properties in Missoula because of the Seeley Lake Fire.”

Yet in a new report, prepared by Headwaters Economics, experts say that the fix for part of the problem may not be as hard — or expensive — as previously thought. Montana can build off the work of other states that have similar problems, like Colorado.

Headwaters Associate Director Kelly Pohl told the Daily Montanan that often builders, politicians and the public fear anything that sounds like more requirements or rules, and worry about rising costs. Yet Pohl pointed out that many of the suggestions and available materials won’t add costs.

he report shows that the number of new Montana homes in areas of moderate to high wildfire risk doubled from 1990 through 2020. Since 2008, Montana has lost more than 1,400 structures to wildfires.

The report outlines three strategies it says can help the Treasure State:

Adopting clear, consistent baseline standards: Update subdivision, zoning and building codes that address structure density and location; building materials and construction techniques; landscaping near structures; water access and supplies; and roads for emergency vehicles and escape routes.

Allow local entities to use statewide data in land-use decisions: Maps from the recent Montana Wildfire Risk Assessment can be used to delineate where standards apply.

Provide technical support: State agencies can provide expertise for local communities.

Something’s changing

The report also details the acceleration of wildfires not just in Montana, but in the United States — especially in the past three decades. For example, the number of structures being burned by wildfires nearly tripled in the years between 1990 and 2016. Eighty-seven percent of all of U.S. wildfires from 2010 to 2020 were human caused, and from 2000 through 2019, more than 2,000 U.S. communities saw wildfires of more than 100 acres come within two miles of those communities. Some federal wildlife official estimate that between 50% and 95% of the $2.5 billion spent on firefighting costs comes from trying to protect homes.

If the wildland fire statistics from the past couple of decades is bracing, future predictions are even worse: Experts forecast that the number of houses being built in wildland-urban interface areas will increase by 82% while the number of wildland fires will likely increase by 100%.

On Maui, the fire that destroyed Lahaina caused at least $5.5 billion worth of damage and took at least 99 lives, although the number of fatalities is expected to grow, according to Maui News and the Associated Press.

Put into Montana-specific numbers, the state is estimated to grow by 17% through 2050, meaning a quarter million people are predicted to move to Montana. Already, Montana has more than 120,000 homes in these wildland-urban interface areas, with the number expected to rise considerably.

The report identified only Missoula County as the area that has tried to adopted WUI codes, while a handful of cities have.

The case for adopting WUI zoning codes

Montana has traditionally resisted adopting zoning codes and ordinances. Recent trends at the state legislature have also hamstrung local cities and counties from adopting certain zoning rules.

However, the report points to a number of benefits by homeowners and governments that adopt the WUI codes.

“Post-fire analyses have found that homes built to modern wildfire safety standards in California were 40% less likely to be destroyed than homes built before the standards were adopted,” it said. “Despite documented benefits derived from enforceable WUI codes, jurisdictions often fear the economic and political cost of implementation… Recent research has confirmed that building code adjustments that account for fire-resilient materials do not impact the construction of new homes.”

A U.S. Department of Commerce study shows that the economic toll from wildfires ranges from $71 billion to as much as $347 billion annually. And a separate FEMA study shows that every $1 of mitigating wildfires results in a savings of $4 in avoided firefighting costs.

“Your neighbor’s inaction puts your property at risk,” Pohl said. “So, we have to do it at a community level because that’s how it will work.”

The problem with current codes

Montana cities and counties are required to have rules about subdividing and developing land. The Montana Subdivision and Platting Act requires certain actions and prohibits others, but they’re not uniform from city to city, or county to county.

For example, Montana law states that local governments cannot permit subdivisions in places that are prone to or are predicted to have natural or human-made hazards, but they can allow development if mandates or zoning can overcome the danger.

“Local jurisdictions have no way to meaningfully enforce these mandates,” the report said. “Local jurisdictions are prohibited from requiring developers to use certain building materials or adopt land-use practices that could mitigate or minimize wildfire risks in high-hazard areas, unless the state has expressly identified the practice as acceptable.”

And state law also prohibits the local governments from denying a subdivision because it sits in a wildland-urban interface.

“Instead, it would either have to find another reason to deny the permit or allow the subdivision to proceed even though the risks of building in that location could cost lives and money in the event of a fire in the WUI,” it said.

The report points out that local government cannot even mandate fire-safe building materials or construction techniques be incorporated.

Montana has also rejected WUI codes when it comes to maintenance standards, including road maintenance and water supply standards, making evacuation and firefighting more difficult.

“There is less resistance to this than you’d think in Montana,” Pohl said. “That’s because Montana’s approach is inadequate and unnecessarily complex. There’s also a misperception about the building community that they would be opposed. But they want to build something that’s durable and long-lasting.”

She said it’s also nice that builders can source materials that are more resistant to fire at an equal cost.

Perfect spot

The report notes that ironically Montana may be better situated than other states that have adopted codes, largely because of state government.

The Montana Department of Natural Resources and Conservation has mapped the entire wildland-urban interface, one of just a few states to have that kind of localized data.

“The legal framework creates little leverage for those maps to be adopted, used and enforced by local authorities,” the report said.

Even before Downing’s office issued a warning that some insurance carriers were dropping or limiting rates, the report had already predicted Montana would see such action:

“While Montana has little control over insurance companies’ decisions, most reputable nationwide insurers already have wildfire risk information and use it to set premium costs for homeowners’ insurance policies. In other words, even if Montana does not implement a statewide WUI code, underwriters and their actuaries already actively pass along their own risk calculations to Montana citizens, hitting the pocket of those who live in the WUI and raising premiums for all citizens. Montana, like other western states, is already seeing insurance companies refuse to cover structures in certain high-risk areas or charge premiums that far exceed the cost of mitigation efforts.”

The report warns that not only could not addressing better zoning and building techniques be costly for Montana, it could even increase the costs by forcing residents to areas where firefighting could become even more expensive.

“Perversely, if some jurisdictions adopt WUI codes and others don’t, it may incentivize development in unregulated areas that are unsuited for growth,” the report said.

Pohl said that adopting better locations with better materials will save the state money in the long run.

“We know people keep coming. So as we’re building new homes, we should be doing it in a way for our outdoor lifestyles,” she said. “There is an aversion to regulations in general, especially in a live-and-let-live state, which for a lot of things in an individualistic state is fine, but it puts us at a disadvantage.”