The California Fair Access to Insurance Requirements Plan Association or “FAIR Plan” was established by statute in 1968 to meet the needs of California homeowners unable to find insurance in the traditional marketplace. The FAIR Plan is a syndicated fire insurance pool comprised of all insurers licensed to conduct property/casualty business in California. All licensed property/casualty insurers that write basic property insurance required by Insurance Code sections 10091(a) and 10095(a) are members of the FAIR Plan. The FAIR Plan issues policies on behalf of its member companies. Each member company participates in the profits, losses, and expenses of the Plan in direct proportion to its market share of business written in the state.
Wildfires have caused insurmountable destruction in California over the last decade, causing many insurers to pull back from the California fire insurance marketplace. While many Californians have turned to the FAIR Plan for fire risk insurance, the FAIR Plan represents itself to the public as an “insurer of last resort” that provides only “basic property coverage.” The FAIR Plan website states: “While we will support homeowners regardless of a property’s fire risk, unlike traditional insurers, our goal is attrition. For most homeowners, the FAIR Plan is a temporary safety net – here to support them until coverage offered by a traditional carrier becomes available.” While attrition may be the goal, the reality for many California homeowners is that coverage from a traditional insurer has not become available, and likely will not, as fires continue to rage throughout the state year after year. Insurers continue to notify homeowners who live in threatened areas that they will not be renewing their coverage. With the marketplace having so few affordable options, many have no choice but to turn to the FAIR Plan.
Because the FAIR Plan was intended to provide only “basic property coverage” and not other types of coverage such as personal liability or theft, homeowners would have to buy a secondary insurance plan in order to have comprehensive coverage equivalent to a typical homeowners insurance policy. In 2019, recognizing the economic disadvantage to Californians living in fire-threatened areas, the Insurance Commissioner ordered the FAIR Plan to begin covering more than just basic property coverage. The order required, in part, that by June 1, 2020, FAIR Plan must offer for sale to California consumers a comprehensive homeowners property insurance policy. The FAIR Plan sued, arguing the Insurance Commissioner’s order was illegal in that the Commissioner lacked statutory authority under the Basic Property Insurance Inspection and Placement Plan to require FAIR Plan to sell a comprehensive homeowners policy. This month, the court held that that the Commissioner did have statutory authority to require FAIR Plan to offer insurance which includes liability coverage, but only if that coverage is related to the property. The full text of the order can be found HERE: