Insurance Creates Policy During Escrow, Cancelled Immediately

[Account Closed]

I just bought a triplex in Oakland, built in 1917, my plan was to rent out the 2x 1br's downstairs, and owner occupy the 2br upstairs.

I got a quote for insurance through an large agency, and a policy—and we were able to close escrow. 

My lender was trying to help me achieve a low downpayment using FHA loan so I could use my liquidity for renovations . So they even went as far as to call my insurance agent and negotiate a higher deductible with a lower premium so that my monthly payment would fit within the FHA requirements.

After closing I started renovations—a few weeks into my contractor redoing my kitchen, an inspector from the insurance agency called and scheduled a time to view the property. They come, and seem nonplussed at some things, taking pictures of the entire property, and even the unit being renovated.  Capturing photos of plumbing, and exposed electrical the electrician was actively working on.

I received a notice about a week later saying my insurance was being cancelled effective 2/1/2018. The notice included no reasons for cancellation, simply saying "4 major systems must be renovated." So I call them up, my agent was out from December 1st to Jan 8th, so I spoke with someone else. They say they want all new electrical (ROMEX), new plumbing (copper or PEX), a new roof, and new heaters (the heaters are new).

Basically it feels like they decided they don't want to insure me and threw everything they could at me to make it insurmountable to maintain my insurance with them.

I'm currently looking for another company to insure my property before my insurance runs out. Ultimately, based on what I've read, it seems insurance providers can do this as they see fit, and it's unlikely I'm going to find someone to cover me with with the dated electrical in some units.

I am feeling very much between a rock and a hard place with the needed renovations; I'm working with an electrician to see how we can upgrade the electrical, and most roofers are completely slammed this time of year and none are available, and as far as the plumbing goes—redoing the galvanized steel with copper will require gutting huge portions of the house. Basically the time-scale this will play out in is much longer than 60 days, and the costs will be much much higher than I can feasibly bite off all at once.

I feel like this should have been caught in escrow. How can I possibly be lead to believe a house is insurable and then have the rug pulled out from under me the second I own it. Dying from anxiety over here, trying to manage all this and my day job.

Advice?