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California Homeowners Win Lawsuit Over Wildfire Insurance Coverage

Updated: Sep 29, 2021

A big thank you to Gwen & Dennis Field of Corinthian Title, who brought this to my attention. Gwen is a guest contributor for my column! Follow Gwen & Dennis on their professional FB page, as they have "state and local" breaking industry news as well. Hello Agents! Good news for homeowners who can now “bundle” their wildfire insurance needs along with their comprehensive needs as the fire season is in full force.

JULY 20, 2021 02:24 PM, BY JASON PIERCE With wildfires burning again and thousands of rural Californians losing their insurance coverage, state regulators have won a key legal battle that they believe could stabilize the fragile market for homeowners’ policies in fire-prone areas. A judge in Los Angeles ruled that Insurance Commissioner Ricardo Lara has the right to force the California FAIR Plan the so-called “insurer of last resort” — to offer more expansive coverage that resembles typical homeowners’ policies. The industry-run FAIR Plan had sued the commissioner, seeking to block his order. The decision by Judge Mary Stroble in Los Angeles Superior Court comes as another difficult wildfire season grips the state. Since 2015 tens of thousands of mostly rural Californians have lost their traditional homeowners’ coverage because of mushrooming wildfire risks. In almost every case, these homeowners are forced to buy a wildfire policy from the FAIR Plan. Then they have to go out and buy a separate policy from a traditional insurer covering the other hazards that are included in a regular homeowners’ policy: break-ins, liability, and so on. The effect is a huge increase in total cost — homeowners who’d been paying, say, $2,000 a year are now paying $6,000 in many instances. Require The Fair Plan to Offer Comprehensive Coverage? In 2019, the last year for which statistics are available, about 75,000 Californians were forced onto the FAIR Plan after their traditional insurance carriers dropped them. That same year, Lara directed the FAIR Plan to start offering comprehensive policies to those who’d lost their coverage. He also ordered the FAIR Plan to double the loss limits on its policies to $3 million — arguing that the old $1.5 million caps on losses were simply too low given the realities of the housing market in some areas of California. The FAIR Plan wound up doubling its loss limits, as Lara ordered, the insurance industry then sued the commissioner over his insistence that the plan offers comprehensive coverage. The plan, which was established by the Legislature but is bankrolled by the industry, not state taxpayers, accused Lara of making a “politically expedient maneuver” that ignored the cause of the insurance crisis — the state’s unwillingness to grant insurers high enough rates to cover the risk of selling insurance in wildfire zones. Officials with the FAIR Plan couldn’t be reached for comment Tuesday. Meanwhile, as the FAIR Plan’s customer rolls grow, Lara has been negotiating with traditional insurance companies on a plan that would require them to sell coverage in fire-prone areas as long as those communities meet certain standards for safeguarding against wildfire risk. That includes “hardening” homes by retrofitting them with fire-resilient materials.

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