Class action claims California's FAIR Plan sold unlawful policies
Total written premium for California's insurer of last resort more than doubled from September 2021 to June 2024.
A class action lawsuit was filed in the Alameda County Superior Court last week on behalf of four Californians — representing more than 365,000 policyholders — against the state’s FAIR Plan Association.
The lawsuit claims the state-regulated insurer of last resort sold policies that illegally fail to properly cover fire damage. It also accuses the state’s Department of Insurance and Insurance Commissioner Richard Lara of not enforcing the laws that are supposed to set standards for these policies.
The San Francisco Chronicle reports that the goal of the suit is not to seek damage for lost benefits, but to obtain a court order requiring the FAIR Plan to comply with state law and increase the scope of wildfire coverage in its policies to include all direct physical loss from fire and smoke.
The number of Californians leaning on the FAIR plan for coverage has seen a massive increase over the last several years thanks to increasing damage from weather events and, in particular, wildfires. In the first nine months of the current fiscal year (through June 2024), the California FAIR Plan Association has written 134,576 new commercial and residential policies – compared to 65,500 and 89,995 for the entirety of fiscal years 2022 and 2023, respectively.
As of June, the FAIR Plan had a total exposure of around $393 billion – 38.3% higher than at the end of the last fiscal year in September 2023. The number of FAIR dwelling policies has increased 164% since 2019, from 154,494 in September 2019 to 408,432 in June 2024.
Total written premium for the FAIR Plan has also more than doubled, from around $424 million to over $1.1 billion, from September 2021 to June 2024.