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CA Department of Insurance

Court upholds Insurance Commissioner Lara’s order to expand FAIR Plan “last resort” coverage to better protect homeowners

News: 2021 Press Release

For Release: July 20, 2021
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Court upholds Insurance Commissioner Lara’s order to expand FAIR Plan “last resort” coverage to better protect homeowners

LOS ANGELES — Insurance Commissioner Ricardo Lara issued the following statement after a California trial court upheld his authority to order the California FAIR Plan to offer broader coverage options to consumers who are increasingly losing their homeowners’ insurance due to the risk of wildfires:

“With insurance companies increasingly dropping their customers due to wildfire risk, homeowners depend on the FAIR Plan as the insurer of last resort for their coverage. The court ruling affirms my authority that the FAIR Plan must offer broader, more comprehensive insurance protection for consumers. In addition, by forcing its policyholders to purchase separate insurance policies for liability and contents on top of its “fire-only” policy, the FAIR Plan drives up the price for consumers, which only benefits the insurance companies that profit from this unfair and costly arrangement. California consumers win when they have greater options for insurance coverage, which is why I ordered the FAIR Plan to modernize its coverage 18 months ago. The FAIR Plan and the insurance companies who control it need to move forward to implement this needed coverage option as soon as possible, and I have directed my staff to work quickly to make sure this comprehensive coverage is available to all Californians.”

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Media notes:

  • Court Order
  • In 2019, Commissioner Lara ordered the FAIR Plan to offer a comprehensive policy more akin to a traditional homeowners policy, in addition to its current fire-only coverage, so a homeowner who was non-renewed or could not obtain similar coverage from a standard insurance company could get this comprehensive coverage from the FAIR Plan. Without the Commissioner’s order, homeowners are forced to purchase an expensive and inconvenient “difference in conditions” coverage on top of their FAIR Plan “fire only” policy in order to get insurance coverage similar to the amount of coverage they previously had through the voluntary market.
  • Los Angeles Superior Court Judge Mary Strobel issued her ruling on July 12, which the Department received on July 19, substantially upholding the Commissioner’s authority to order broader coverage options to consumers. She directed the Commissioner to remove “some liability coverages that have no relationship, nexus, or connection to the insured property” and to resubmit his order to the FAIR Plan for immediate implementation.

Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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