Altadena Commercial Owners Waiting For Insurance Payouts But Expect They Will Fall Short

Insurance companies have paid out more than $17B for claims filed since January by owners in the Eaton and Palisades fire areas. That number is expected to grow as rebuilding gets underway. 

Those payouts are helping owners begin to imagine the rebuilding process — and realize how much additional funding will be needed to bring that to fruition. 

Commercial owners tell Bisnow that navigating the insurance process has been a learning experience. They say it has tested what they thought they knew about their own coverage and how the reality of what their insurance payout will cover is affecting their decision-making as they rebuild. 

“I know what I signed up for,” Café de Leche co-owner Matt Schodorf said. 

“I'm a small-business person. This is what we do. But it is daunting, scary.”  

As of May 12, insurance companies had partially paid 35,214 of the 38,120 claims filed by homeowners and commercial property owners for disaster-related issues in conjunction with the blazes that ravaged Los Angeles in January, according to the most recent data from the California Department of Insurance.

“Wildfire survivors deserve more than promises,” Michael Soller, a spokesperson for the California Department of Insurance, said in an emailed statement. 

“After a disaster, no family should be forced to fight the insurance company they pay their hard-earned money to as they rebuild their lives.” 

Soller said the state is working hard to ensure that insurers follow the state’s consumer protection laws. The department launched an investigation into State Farm’s handling of residential and commercial claims related to the Eaton and Palisades fires earlier this month. 

William J. Galloway Jr. is among the claimants who have received a partial payout. Two of the three buildings that Galloway owns near Mariposa Street and Lake Avenue burned down.

The brick facade of the multitenant retail building that once housed the Altadena Hardware store and other tenants is in the process of having all the debris cleared out of it — something Galloway had been waiting for his insurance company to approve for months. 

Another of his buildings will have to be completely razed, but he hasn’t gotten the OK to do that yet from insurance. 

Galloway hired a public adjuster — a paid intermediary that represents him in discussions with the insurance company’s adjuster and has his interests in mind — which has taken a lot of the dirty work of insurance off his plate. The adjuster takes a percentage of the final payout from insurance as his fee, but Galloway said he feels it is money well spent just to hand that work off to someone else. 

It leaves him with more time to work ahead — talk to architects and contractors — so that once his final payout rolls in from his insurance company, he will be ready to act. 

“I’m on hold,” Galloway said. 

“In the meantime, I work at other things to try and move forward.”

Around the corner from Galloway’s buildings, the small, standalone building that once housed the Café de Leche coffee shop is also a total loss. 

“Insurance has never been an issue with us,” Schodorf said.

He said his insurance adjuster was helpful and seemed agreeable enough, but he acknowledged that he is underinsured. 

His insurance company, Hartford, has paid out in full, but the full payout likely isn’t enough to cover the full cost of rebuilding, meaning he will need to take out additional loans to cover those costs. 

Schodorf is still paying off the loan he took out to remodel the space when his café was a tenant in the building, as well as the Small Business Administration loan he took out to help buy the property. 

“Now, I have to take out another loan to rebuild because — it's not their fault, but like a lot of people, I'm sure, we're underinsured,” Schodorf said. 

An estimated 75% of small businesses are underinsured, according to a 2023 survey from Hiscox, a global insurer specializing in small-business clients.

Schodorf’s café has other locations in the city, but this property was the only one the business owned. 

“You never know what's going to happen in the future, and if everything hit the fan, at least we own this, right?” Schodorf said. “This was our safe space, and this is the thing that burnt to the ground.” 

Galloway has insurance to protect him in the event of lost rent in situations like these, and those checks have been coming, he said. 

Schodorf’s business interruption insurance has paid out partially, because the insurer is working under the assumption that he might find a temporary space to operate out of, negating the reason to pay him for lost business. Schodorf said he thinks the insurer will eventually see the error in that and pay him fully.

He said it makes little sense to invest in a temporary space that he will, hopefully, have to vacate fairly soon to return to a rebuilt permanent location.

Galloway said if he could go back in time with the knowledge he has now, he would make sure he was more completely insured for the worst-case scenario. 

“I'd always look at a total loss situation when I'm looking at insurance policy,” Galloway said. 

“But I express that term ‘total loss’ because most people don't think about a total loss. They don't think about leaving to go to work in the morning and coming home and the house being completely gone.”

Despite the financial hurdles posed by insurance gaps in the rebuilding process, Schodorf and Galloway are planning to rebuild and restart their businesses in Altadena. Both owners are waiting to get complete estimates from contractors on what a full rebuild will cost. 

“That whole number is, it's obviously the important number, because then I think that I can start really working on what I can do and can't do,” Galloway said.

His buildings included one with a handsome brick exterior that he said will be costly to replicate exactly, but he would like to rebuild it as close to original as possible. 

For owners who have to bear a larger brunt of the rebuilding costs, the stakes will be even higher, and the need for business to come back strong will be greater. The question of who will patronize once the structures are back and operations are up and running still looms large. 

“Is the community going to be back to be able to support us in the way that we need to be able to operate this thing?” Schodorf asked. 

“I mean, I hope so. It's all hope.”