Even with insurance in hand, many Pacific Palisades homeowners are discovering that rebuilding after the January 2025 fires comes with a staggering gap.

New data from ClaimArchitect – an AI-driven startup focused on creating rebuild estimates for fire victims – revealed that the average shortfall between a Pacific Palisades homeowner’s insurance payout offer and their actual cost to rebuild is $603 per square foot, or $1.5 million overall.

ClaimArchitect was born out of Pali Builds, an online platform launched in July to track rebuilding efforts in Pacific Palisades and connect homeowners with information and resources. As insurance claims continue to disrupt fire victims’ ability to rebuild, the Pali Builds team wanted to quantify the gap in resources that people were receiving by providing what they deem to be more accurate estimates for rebuilding.

In analyzing 37 client cases, ClaimArchitect found that every insurance claim fell short of the startup’s rebuild calculations, though the degree varied. At best, there was an overall gap of $164,000, and at worst, it was $3.4 million. Looking at the median – which aligned closely with the average – homeowners are seeing a $1.4 million difference, or $559 per square foot.

To receive a ClaimArchitect estimate, a client uploads their insurance policy and their adjuster’s estimate. There’s a flat fee of $5,000 though the fee will be refunded if the company’s estimate comes out equal to or lower than the original adjuster’s estimate.

The Pali Builds team then creates an in-depth report, leveraging artificial intelligence tools, pre-fire photos of the home and any available construction plans or architectural drawings.

To come up with individual line items and the cost for each, they use takeoff software, which generates construction estimates based on a variety of factors. That includes materials, labor and the home’s overall plan.

A sample report reviewed by the Business Journal spanned 38 pages and outlined costs for more than 400 line items such as debris removal, soil testing, insulation, labor and much more. Once this report is generated, it is then checked over by the team’s “personal database” of general contractor and subcontractor quotes and a professional general contractor, said Mike Furnari, president of Pali Builds.

‘Inefficiencies, frustrations’

Furnari, who lost his home in the Palisades Fire, said he’s “(a) startup guy at heart,” having previously founded an automotive insurance tech company. Teaming up with Pali Builds shortly after its founding, Furnari feels well positioned to provide these services based on both his professional and personal experience.

“I’m dealing with this personally, and so I’m seeing the inefficiencies and the frustrations,” he said. “And if I’m having these challenges, it’s clearly happening to everybody.”

Furnari, along with Pali Builds Chief Executive Frank Renfro, made clear they aren’t in the business of providing legal or tax services and advice. Instead, their work is simply a means to deliver a holistic view of the cost to rebuild for homeowners. From there, the client can do what they want with the report whether it’s used for a guide with their construction team or shared with an attorney to challenge their insurance’s payout.

“We’re not only giving the numbers, but really the confidence and the clarity to make a decision on how to move forward because that’s what we want as a community … and right now, we’re seeing everybody stuck,” Furnari said.

Also important to consider are the soft costs associated with rebuilding, Renfro said, noting the estimate to rebuild that insurance companies give homeowners also must cover engineering, architect and permitting fees.

“When the insurance company is offering $450 (per square foot), you really have to back out some of those dollars because it’s actually lower,” he said. “Depending on the size of the home… it’s really almost like $400 if you’re going to compare that number to an estimate from a general contractor.”

Even though he knew the insurance landscape was an issue, Furnari said he was “completely shocked to actually see the numbers in aggregate and averaged out,” detailing the shortfalls.

“That gave us even more resolve that we were on the right track,” he said.

‘Catastrophic’

Carolyn Kousky, founder and executive director of Insurance for Good – a nonprofit which works with community members and the public sector on insurance and risk transfer solutions – wasn’t surprised by ClaimArchitect’s findings.

Instead, she’s focused on the why. To unpack that, some context is needed, she said. Prior to the January 2025 wildfires, California’s property insurance had already been “in a state of stress,” Kousky said, pointing to the 2017 and 2018 wildfire seasons.

“That really sort of awakened the insurance industry to this new era of catastrophic wildfire,” Kousky said. “Our failure to rapidly decarbonize has locked us into this growing risk and so, severe fires aren’t thought of anymore as a one-off, but an indication that we’re going to be seeing this type of event with increasing frequency and severity. And that caused some fundamental rethinking about insurance.”

On top of that, the regulatory environment at the time created hurdles where insurance companies felt like they were unable to adequately price for the risk, she said. As a result, these companies pulled back from riskier areas both in declining to renew policies and opting not to write new ones. That meant many people had to turn to the FAIR Plan – the state’s last resort insurer – which “is not designed to have enough money on hand to pay claims from an incredibly severe event,” Kousky said.

Building from those circumstances, the shortfall that L.A. fire victims are seeing today in having sufficient coverage can be the result of several factors. This includes having opted out of extensive coverage due to high costs, being misled by bad actors, having certain exclusions or sub limits in their insurance contracts or having an outdated policy.

For example, if someone’s insurance policy was created 20 years ago when the cost to build was significantly cheaper, the payout of that agreement would not hold up realistically in today’s economy. 

“The cost to rebuild goes up, home values go up, and yet people don’t reevaluate their insurance policy,” Kousky said.This also applies to a homeowner making changes to a home, like building an ADU or
carrying out a remodel which increases the home’s value.

Impact and solutions

While this disconnect between proper coverage and disaster aftermath is seen across natural disasters on a national scale, Kousky said it is “particularly pronounced in California.”

For starters, the cost of housing is greater here. And when a disaster occurs and demand outpaces supply, those costs become even higher. This not only makes it more challenging to rebuild but also makes securing new insurance more difficult. This is happening now but also happened several years ago following the Covid-19 pandemic, Kousky said, which impacted people’s policy decisions leading up to these fires.

“If you look at construction related costs, they have been much, much higher than general inflation, and insurance premiums for property insurance track the construction inflation, not general inflation, which I think is not really well understood,” Kousky said.

Then on top of all of that, we’re seeing further price impacts from tariffs and ICE raids, she said. In terms of solutions, Kousky suggests requiring some sort of base level coverage for everyone, especially those in high-risk areas. For those who can’t afford the costs, she advocates for socially driven policy solutions for coverage funding. To get ahead of the issue, mandating stronger building codes, land-use planning and creating fire-resistant communities are top of mind.

“(We also need) better consumer education, better agent outreach, better interaction between the agent and the consumer to make sure (homeowners) are getting the coverage they need,” Kousky said.

Looking at insurance companies, Furnari and Renfro assert that a more local focus could mitigate some of these estimate shortfalls.

“The industry standard software was created by the insurance companies, for the insurance companies,” Furnari said. “It’s pulling national average build data, which, as we know, in a hyper local market like the Palisades or Altadena, is not accurate at all.”

To combat potential additional costs for these companies, Renfro suggests they embrace AI to increase accuracy and transparency and reduce labor costs.

Pali Builds also intends to create a presence in Altadena beginning early this year.

“Altadena homeowners are experiencing the same challenges the Palisades homeowners are,” Furnari said. “The numbers might be a little different, but the challenges are the same.”