As Michelle Fuller’s historic Castro Victorian faces foreclosure after her insurer denied her claim for devastating flood damage, discovered after a long-term tenancy spanning seven years. Data reveals some non-admitted carriers, now prevalent in California, deny claims at nearly twice the national average, at a staggering 67% denial rate.
I. Crisis Context: California’s Collapsing Insurance Market
SAN FRANCISCO, CA – A crisis is gripping California’s insurance market, with deep roots in the retreat of major insurers from the state. As established companies like Farmers Insurance – which dropped Michelle Fuller’s policy for her Castro Victorian in 2022 – reduce their exposure, a vacuum has formed. This void is rapidly being filled by “surplus line” or “non-admitted” carriers, often backed by complex corporate structures; for instance, Bamboo Ide8 (aka Bamboo Insurance @bambooinsurance.com), a key player in this new landscape, has its executive office in Palo Alto and was formed in Arizona, while its biggest investor is headquartered in Bermuda.
These surplus line insurers are not licensed in California. Consequently, they operate outside many state regulations, including those limiting premium hikes and requiring contributions to the state’s insurer of last resort, the FAIR Plan. This regulatory gap allows them to offer coverage where others won’t, but often at a higher cost. As emerging data suggests, this also comes with increased claims being denied.
This shift has not gone unnoticed by consumer advocates. “They see a great opportunity in people’s desperation,” warns Amy Bach, head of the nonprofit United Policyholders. “They’re only really looking at the premium income. They’re gambling that the claims won’t outweigh the gains. But you don’t just get to collect the money and never have to pay it back.” This pursuit of profit, critics argue, can come at a steep cost to vulnerable homeowners.
Photo credit: SF Standard
II. Case Study: Michelle Fuller’s Victorian
Michelle Fuller poured her life into a three-bedroom Victorian on 15th Street in the Castro, a home she purchased in 2005 for $985,000. It was more than an investment; it was a stake in the city for her family. But that dream has been submerged by a flood of misfortune and an ensuing insurance nightmare, positioning her plight as a stark illustration of this burgeoning crisis.
After Farmers Insurance dropped her policy in 2022, Fuller, like a growing number of Californians, turned to a surplus line insurer. Her policy was with Sutton Specialty Insurance Co., issued through the managing general agent Bamboo Insurance. The turning point came after a renter allegedly flooded her historic home.
“The wood was warped, the walls were peeling, the baseboards were popping off — it looked like the set of a Tim Burton movie,” Fuller described. “My sweet, beautiful home was destroyed.” The property was rendered legally uninhabitable.
Despite the clear devastation, her insurer, Sutton Specialty via Bambooinsurance.com, denied her claim, classifying the extensive damage as uncovered “wear and tear.” Fuller vehemently disputes this assessment and points to a pattern of denying claims for this reason as it is heavily reported as a tactic by other insureds.
III. Pattern of Denial: The Data Speaks
Disturbingly, new data suggests that claim denials like the one Michelle Fuller experienced may be part of a larger pattern. An exclusive analysis of National Association of Insurance Commissioners (NAIC) data, compiled by independent firm Weiss Ratings, reveals that Sutton Specialty rejected more than two-thirds (67%) of claims on residential homes in California in 2024.
This figure stands in stark contrast to the national average denial rate for home insurance companies, which is 37%, according to NAIC – itself an increase from 25% two decades ago.
“Anything over 40% is alarming,” stated Martin Weiss, founder of Weiss Ratings. “At a minimum, this is a glaring red flag.” With Bamboo Insurance at 67% we are alarmed.
By Weiss’s definition, seven of the 11 surplus line insurers in California with $1 million or more in premiums and at least 1,000 claims closed in 2024 reported denial rates that should sound the alarm. This non-admitted market reported explosive growth in 2024 – 1,500% in San Jose and 2,500% in Bakersfield – indicating a significant shift in how Californians are insuring their homes.
Bamboo Insurance’s idea of “wear & tear”:
IV. The Ripple Effect: From Denied Claims to Homelessness
For Michelle Fuller, the denial of her claim has had catastrophic consequences. With no way to rent out the two-story, 130-year-old house, and thus no rental income to cover the mortgage, Fuller, who is retired, has depleted her savings. She now relies on public subsidies for her support. Her beloved Victorian has lapsed into foreclosure.
“Why didn’t they pay my rightful claim? Instead, they spend all this money fighting me,” Fuller lamented. “They deny and cancel, or deny, deny, deny, and then cancel. They had a duty to investigate, pay the rightful claim and subrogate the tenant’s insurance, a policy required by the tenant’s lease. But instead spent more money wrongfully denying, inspecting the property time and time again, getting investigators and hiring attorneys to fight a right claim.”
Fuller’s experience is not isolated. Other homeowners have also faced dire situations after claim denials from similar entities:
- Rita Kahlenberg of North Hollywood was denied a claim by Catlin Insurance Co. (brokered by Bamboo) for water damage after a leaky pipe flooded her home shortly after her husband’s death. They cited “wear and tear” and canceled her policy. Later she sued Sutton National for elder abuse and then settled right before trial.
- Donnie Muldrow says Bamboo declined to fully cover significant water damage from a burst dishwasher hose in his Los Angeles rental home, again citing “wear and tear” despite a contradictory inspection by a contractor.
- Gary Neil and Angela Noriega of Sonora submitted claims for $200,000 in property damage and income loss after a storm knocked a tree onto their home. Their lawsuit alleges Bamboo “repeatedly and consistently refused to consider the nature and extent” of the loss.
V. Regulatory Failure
The convoluted structure of these insurance arrangements, often involving managing general agents like Bamboo Insurance – which has its executive office in Palo Alto, was formed in Arizona, and whose biggest investor is in Bermuda – can leave policyholders confused. Bamboo underwrites policies for both licensed and unlicensed carriers.
The Surplus Line Association of California, a consortium of non-admitted carriers, essentially self-police-s itself in the absence of direct oversight from the state’s Department of Insurance. At its annual meeting in February, its director, Benjamin McKay, touted the growth and described surplus lines as “a necessary pressure valve.” However, this “valve” comes with unregulated rate hikes and often one-year contracts for consumers.
Amy Bach of United Policyholders worries about an insurance product originally intended for “small, weird risks” rapidly expanding into primary homeowner coverage. “This is a relatively new phenomenon, something that’s emerged really just in the past five years,” she said, warning that these companies are “driving semi-trucks through a loophole that was only supposed to be big enough for a pickup truck.” She points to Florida and Louisiana as cautionary tales.
Martin Weiss echoes these concerns, likening California’s situation to Florida, “the canary in the coal mine.”
The California Department of Insurance did not respond to requests for comment on these issues or the findings.
VI. The Legal Battlefield
In court filings related to various lawsuits, Bamboo has repeatedly denied wrongdoing, citing policy exemptions and alleged misrepresentations by policyholders. The company stated it wouldn’t comment on “matters in litigation, or any of the personal details of our policyholders” and did not respond to a query regarding Weiss Ratings’ findings on its affiliates’ low payout rate on client claims.
For now, the primary recourse for homeowners like Michelle Fuller appears to be individual legal battles. As she fights to save her Castro Victorian, her personal tragedy has become a symbol of a larger, systemic problem. Fuller is determined to see her case through, potentially to trial.
“This has been my whole life,” she stated, her voice reflecting the depth of her loss and her resolve. “I’ve lost everything. I have nothing to lose. I can’t walk away and why should I?”
VII. Consumer Alert: What Homeowners Need to Know
The experiences of homeowners like Michelle Fuller serve as a critical warning for Californians navigating a treacherous insurance market. It’s crucial for consumers to understand what “surplus line” or “non-admitted” insurance truly means. Historically, these policies were for unique, specialized risks – Lloyds of London, a well-known surplus line insurer, famously covered items like celebrity’s legs or unique ventures. As Amy Bach of United Policyholders notes, this type of insurance was intended for “small, weird risks,” not as a widespread solution for average homeowners. Today, however, these less-regulated policies are increasingly the only option for many.
Adding to potential confusion, companies operating in this space project confidence in their underwriting. For instance, Bamboo’s founder, John Chu, has stated, “We’re better at matching the risk to the price.” Yet, this claim contrasts sharply with the experiences of policyholders like Michelle Fuller who face claim denials. Homeowners should be aware that “surplus line” or “non-admitted” carriers operate under a different set of rules than standard “admitted” insurers. They are subject to less state regulation, and their policies and practices do not undergo the same level of scrutiny by the California Department of Insurance. This environment can lead to situations where claims are denied based on interpretations of policy terms that might not hold up under the stricter oversight applied to admitted carriers.
This lack of transparency is a significant concern. Martin Weiss of Weiss Ratings points to a critical problem: “They get ’em on the way in and on the way out,” he said. “It’s a really horrible situation, because there’s no disclosure to the customers.” Understanding that a “surplus line” policy means you are dealing with a “non-admitted” insurer, with fewer regulatory protections, is paramount.
Michelle Fuller’s ongoing battle highlights the devastating consequences homeowners can face. Those wishing to support Michelle in her fight to save her home and seek justice can find more information on how to help through channels that will be made available by her and her advocates. Her struggle underscores the urgent need for greater consumer awareness, scrutiny of insurer practices, and potential regulatory reform in California’s evolving insurance landscape.
VIII. The Road Ahead
The Surplus Line Association of California spokesperson, Alicia Copple, defended rising premiums as driven by “multiple factors,” including inflation and wildfire risks, stating surplus line carriers “use market-based pricing models to ensure they can pay claims and remain financially sound.”
However, the lack of response from the Department of Insurance to inquiries about this growing market segment and its high denial rates remains a significant concern.
“Nobody really knows the nitty gritty behind the numbers,” Martin Weiss urged, “which is why the state should do a detailed investigation. What is really going on here?”
Michelle Fuller’s continued fight is not just a personal journey to save her home; it symbolizes a broader movement of homeowners seeking accountability and fairness. Her determination, in the face of overwhelming adversity, puts a human face on a crisis that demands urgent attention and action from regulators and lawmakers.
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