Homeowner Surcharge to Bailout Insurers for FAIR Plan Losses Unfair and Illegal, Says Consumer Watchdog
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LOS ANGELES, Feb. 11, 2025 ~ In a recent announcement, Insurance Commissioner Ricardo Lara has stated that he will allow home insurance companies to charge all homeowners in the state for losses incurred by the FAIR Plan in the Los Angeles fires. This decision has been met with criticism from consumer advocacy group Consumer Watchdog, who believes that insurance companies should be held accountable for their actions.

According to Carmen Balber, executive director of Consumer Watchdog, the FAIR Plan is facing financial trouble due to insurance companies dropping too many homeowners. As a result, these insurers are now responsible for covering the losses incurred by the FAIR Plan. Balber argues that it is unfair for homeowners across California to bear the burden of repairing damages caused by insurance companies' predatory behavior.

Consumer Watchdog also points out that this move goes against the law, as the statute enacting the FAIR Plan explicitly states that insurance companies are responsible for these losses. The statute requires insurers to participate proportionally in all aspects of the Fair Plan, including expenses and losses.

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Furthermore, it has been revealed that at least one insurance company has reinsurance in place to cover FAIR Plan assessments. This raises concerns about whether insurance companies will be reimbursed twice for these losses and if Commissioner Lara intends to allow such double dipping.

Consumer Watchdog has been vocal about their opposition to this decision and believes it rewards bad behavior from insurance companies. They argue that this will only encourage insurers to drop more homeowners and force them onto the FAIR Plan in the future without facing any consequences.

Balber also points out that bailing out insurance companies for FAIR Plan losses will not guarantee their continued presence in California. In Florida, where consumers are required to pay for assessments at their version of the FAIR Plan, rates are significantly higher and more homeowners are stuck with their insurer of last resort despite efforts by industry groups to change laws.

Instead of a bailout, Consumer Watchdog suggests moving people off the FAIR Plan and into comprehensive coverage as a way to protect consumers and stabilize the plan. They also call for new protections, such as requiring insurance companies to cover homeowners who meet statewide mitigation standards and take steps to protect their homes from wildfires.

It is worth noting that today's action by Commissioner Lara is based on a bulletin issued eight months ago, rather than a regulation with the force of law. Consumer Watchdog believes that this decision only serves to reward insurance companies for their bad behavior and does not address the root issue at hand.
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