This California business was mushrooming. Then came the insurance crisis

Joel Gutierrez jumped into the mushroom business by chance, when his teenage son Evan brought home a few growing bags from a school trip at the local Tumbling Creek Farm in Nevada City.

The white puffy pompoms that sprouted out of those bags fired up his curiosity, motivating Gutierrez to enroll in a class in mushroom growing, research the benefits of fungi and, for a time, work at Tumbling Creek himself to learn the trade.

Now he’s operating his own fledgling mushroom business in Colfax, the heavily forested foothill town off Interstate 80 just east of Auburn.

There’s one major problem with his dream, however.

Colfax is right in the middle of one of California’s many high-risk fire zones which for the past two years have been facing a growing insurance crisis. Gutierrez and his family are among thousands of locals who this summer have been dropped from their homeowners wildfire insurance, forcing them to look for more expensive plans they were unprepared to handle.

The extreme fire-danger conditions also have prompted their energy supplier, Pacific Gas & Electric Company, to warn them other rural Californians about impending public-safety power shutoffs. For Gutierrez, that would mean setting business back to up to two months and losing some of his primary customers.

The Gutierrez family is one among tens of thousands of Californians who have seen their insurance coverage dropped because they live in a high-risk fire zone. This week, California Insurance Commissioner Ricardo Lara reported that nearly 350,000 policies had been dropped over the past four years, creating a crisis in rural areas that has started to impact the housing market and businesses.

The mushroom farm in Colfax is one of them.

“He’d been little by little growing his farm, he’d got lots of accounts, everything was going really well,” Joel Gutierrez’ wife and business partner Jessica Gutierrez said in an interview. “And then this year… our homeowners insurance was canceled, which was a stressful expense that was added to our already strapped budget.”

Gutierrez — a physicist and UC Davis graduate — built Foothill Fungi from the ground up a year after losing his 8-year job as an acoustic scientist at Burst Laboratories, a clean energy tech company in Grass Valley.

Joel Gutierrez, a mushroom cultivator at Foothill Fungi, shows a mushroom that he grew at his home in Colfax, Wednesday, August 7, 2019. His farm is struggling to stay in business since provider Travelers Insurance dropped their coverage and PG&E implemented public safety power shutoff policies. Daniel Kim

On the farm’s website, Gutierrez says Foothill Fungi was an alternate strategy to generate income. But mushrooms, he discovered, have potential that far outweigh earnings. He says they can enhance mental health, detoxification, digestion and blood purification. They can also benefit the environment by healing contaminated soil, according to Gutierrez’ research, NATO and the American Society for Microbiology.

Gutierrez started growing his first batch of mushroom variety Lion’s Mane in his garage, which he converted into a home office and lab. He now produces half a dozen batches at a time and has moved to a larger, two-room lab-converted shelter on his 1.8-acre property in Colfax.

For the past two years, he said the farm has made “leaps and bounds” of success selling to local community businesses. Foothill Fungi distributes fungi varieties from Nevada City in Nevada County to Meadow Vista in Placer County, selling to farm stands, co-op grocery stores and restaurants.

Before the family’s homeowners insurance was cut off on June 9, Gutierrez said he was planning to expand his sales to the medical market and commercial compost suppliers. The family business is also trying to expand to outlets in Auburn and Sacramento in the next year or two.

The Gutierrezes received a notice of discontinuation from their provider Travelers Insurance in the spring.

Fire seasons have been growing in force and devastating violence, and insurers – which in the past two years have suffered a total $24 billion in losses – have been shedding customers like the Gutierrezes.

They were told their plan could not be renewed because they lived in a “high brush” area, Jessica Gutierrez said.

Left without protection, the family had to purchase expensive fire preparedness equipment to safeguard the farm. And since every insurance application they filed was denied, they also had to fall back on a last-resort Cal FAIR option, a plan designed for those rejected by the voluntary insurance market. The new policy costs them about $1,000 more than the previous plan.

As they struggled to get by, that May the Gutierrezes received another notice – this time, from PG&E.

“We are expanding and enhancing our Community Wildfire Safety Program to further reduce wildfire risks and help keep our customers and the communities we serve safe,” the company announced. “This includes expanding our Public Safety Power Shutoff program beginning with the 2019 wildfire season to include all electric lines that pass through high fire-threat areas – both distribution and transmission.”

The company said that any of its over 5 million electric customers could be affected by the power shut-offs, but Tier-3 and Tier-2 areas – with “extreme” and “elevated” wildfire risk according to the California Public Utilities Commission – are significantly more likely to be affected by the policy.

The company has announced that “if there is a Red Flag Warning, winds at 25 MPH, Humidity 20 or lower, our electricity will be cut off,” Kathy Sihner, who lives next door to the Gutierrezes, told them in an email.

Residents of the town told The Bee last spring they expect the city “to burn any summer,” since every one of them faces a maximum fire hazard, according to Cal Fire’s hazard severity maps.

The Gutierrezes said many locals fear Colfax will be the next Paradise. And now, on top of that fear, they will have to worry about getting by, possibly for several days, without electricity and gas.

If the power shuts off for more than five days, the family mushroom farm may struggle to recover. They would lose about two months of produce, Joel Gutierrez said, with thousands in losses.

“This is an indoor cultivation process,” he said. “So if I can’t maintain the lighting, the temperature, humidity, then everything is lost.”

Gutierrez said he would also lose some of his primary customers, such as the farm-to-table Three Forks Bakery & Brewing Co. in Nevada City.

Joel Gutierrez, a mushroom cultivator, walks through his micro mushroom farm, Foothill Fungi, next to his home in Colfax, Wednesday, August 7, 2019. The farm is struggling to stay in business since provider Travelers Insurance dropped their coverage and PG&E implemented public safety power shutoff policies. Daniel Kim

Of the 90 pounds of mushrooms Gutierrez personally distributes every week, he said about 80 are purchased by this Nevada company, which is committed to local-only produce. But if Foothill Fungi went out of business for a month or longer, Gutierrez said local competitors wouldn’t be able to supply sufficient amounts and the company would be forced to do business with statewide distributors.

The family said PG&E’s threats to power outages have created a need to purchase expensive equipment for back-up power. They are currently looking to purchase a generator, which would cost them an estimated $6,000 to install.

The family said they’ve been fortunate that their land crops have not been impacted by wildfires yet. They are determined to hold on to their property and keep the farm running, but if the problem of wildfires in the Foothills continues to escalate and they don’t find another insurance provider soon, Joel Gutierrez said he fears they might have to move.

The family started a crowdfunding campaign to support their immediate expenses until they find an alternate homeowners coverage plan.

“We’re still kind of waiting and seeing what happens,” Jessica Gutierrez said. “But we realize that between (the insurance loss and power cut-offs), we are kind of on a thin wire.”

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Caroline Ghisolfi, from Stanford University, is a local news reporter for The Sacramento Bee, focusing on breaking news and health care. She grew up in Milan, Italy.