Judge Rules California’s FAIR Plan not Playing Fair

Los Angeles Superior Court Judge Stuart Rice has ruled that California’s insurer of last resort, the FAIR Plan’s smoke-damage policy is violating state insurance law. Rice ruled that the FAIR Plan is providing less coverage than what the Standard Form Fire Insurance Policy requires.

The issue flared up after claims started coming in from the Los Angeles wildfires late last year. The FAIR Plan offered a claimant a fraction of what it will cost to cover smoke-damage remediation costs. The plan also told the claimant that the fire debris clean up isn’t covered because it can’t be counted as a direct physical loss.

The judge disagrees.

FAIR Plan spokeswoman, Hilary McLean said the insurer of last resort is reviewing the decision and likely won’t appeal, “As the FAIR Plan is in the process of updating its policy language to reflect the manner in which claims have been adjusted since last year, it is unlikely to pursue an appeal.”

On a totally separate issue, Consumer Watchdog has sued the California Department of Insurance for allowing insurers to try to recoup $500 million in losses with policy fees because they were ordered to put $1 billion to pay damage claims by Insurance Commissioner Ricardo Lara.

In his order, Lara said the insurers can recover half of those costs with fees. Thus the $500 million. The department has asked the judge to dismiss the case.

The American Property Casualty Insurance Association (APCIA) issued a statement supporting Lara’s decision. The APCIA said it considers the recovery part of the plan important to prevent more destabilization of the state’s already very fragile insurance market.

“Blocking FAIR Plan cost recovery would jeopardize the last-resort coverage option for homeowners and push the market closer to collapse,” the statement said. “It is critical that recovery costs be spread equitably across a broader pool of policyholders to stabilize the system and protect access to coverage for all Californians.”

Source link: Insurance Journal — https://bit.ly/4kvYEJH

Source link: PropertyCasualty360.com — https://bit.ly/4lHoP0O