Homeowners in California are facing a growing crisis in obtaining fire insurance coverage. The state’s insurance commissioner, Ricardo Lara, recently ordered the FAIR Plan, a statewide insurance program, to expand its coverage options. However, the FAIR Plan has filed a petition in court to block the changes.
The FAIR Plan was created as a last resort for homeowners who cannot find traditional insurance coverage. However, its policies are often more expensive and offer less coverage than traditional policies. In recent years, many insurance companies have refused to provide fire insurance to homeowners in areas prone to wildfires, forcing them to turn to the FAIR Plan.
Lara’s order requires the FAIR Plan to offer more comprehensive coverage, known as an HO-3 policy, and to increase coverage limits from $1.5 million to $3 million. The plan must also allow residents to pay by credit card with a monthly payment option. However, the FAIR Plan argues that these changes will raise costs for homeowners and are outside its mandate to provide basic insurance coverage.
“We appreciate the efforts of the commissioner to address the impact of California’s devastating wildfires on homeowners,” said Anneliese Jivan, president of the California FAIR Plan Association. “Unfortunately, this order, as written, would negatively impact consumers and further destabilize the voluntary insurance marketplace.”
The FAIR Plan also expressed concerns about the potential impact on policyholders’ financial data and the prohibition on passing credit card charge fees to customers. Lara rejected the lawsuit’s allegations, stating that he took action on behalf of California consumers who are struggling to find adequate coverage to protect their homes.
The issue is critical, with wildfire claims exceeding $26 billion in California in 2017 and 2018. Many homeowners who are forced into the FAIR Plan supplement their fire insurance policy with another policy to cover other types of damage. The FAIR Plan’s lawsuit against Lara’s order highlights the complex challenges facing California’s insurance market in the face of increasing wildfire risks.
