Latest news with #CaliforniaFAIRPlanAssociation
Los Angeles Times
25-06-2025
- Business
- Los Angeles Times
In landmark decision, judge rules California FAIR Plan's smoke-damage policy illegal
In a landmark decision, a Los Angeles judge ruled that California's home insurer of last resort is violating state law by how it treats smoke-damage claims — a policy that homeowners have long complained shortchanges them, including, most recently, victims of the Jan. 7 firestorms. Los Angeles County Superior Court Judge Stuart Rice on Tuesday said that the California FAIR Plan Association's policy violates the insurance code because it provides less coverage than what is required by the state's Standard Form Fire Insurance Policy, which provides coverage for all 'loss by fire' damages without making any distinction for smoke damage. Since 2017, the plan has required that fire claims must result in 'direct physical loss' as defined by 'permanent physical changes' to a property, which owners allege has made it more difficult to be compensated for smoke damage. The plan issued a notice to its customers that year that said the new definition of direct physical loss 'will result in the denial of claims that might have been paid under prior policy wording,' Rice noted in his decision, in a case brought by a former Mono County property owner. 'This notice seems to admit that the CFP Policy is less favorable to insureds than the Standard Form Policy,' the judge wrote, in declaring the policy illegal. Hilary McLean, a spokesperson for the plan, said it did not have an immediate comment on the ruling. Rex Frazier, president of the Personal Insurance Federation of California, which represents major property and casualty insurers, said the ruling would lead to untenable increases in costs for the plan 'If the case stands for the proposition that the FAIR Plan needs to pay for very expensive lab testing in order to deny a smoke claim, then we will all suffer,' Frazier said. 'That would dramatically increase claims expenses, which would, without doubt, lead to rate increase needs for the FAIR Plan.' The FAIR Plan's handling of smoke-damage claims has angered homeowners who say that instead of being promptly offered industrial hygienic testing for toxic substances and professional cleaning services — even after homes were infiltrated by soot, ash and other fire debris — they were told to try to clean up their properties and given lowball offers to close their claims. The decision could have broad implications given the fast growth of the FAIR Plan, which is based in Los Angeles and operated by the state's licensed home insurers. Long a minor player in homeowners market, it has seen its rolls skyrocket in the last several years as insurers have pulled out of California's home insurance market, citing a growing risk from climate change, resulting in a series of catastrophic fires. The plan covered less than a quarter million California homeowners in 2021 but as of March its residential enrollment had reached 556,000. The number of homes on the plan in the Palisades and Eaton fire zones rose nearly 50% last year to 28,440, according to a Times analysis. 'This is a complete game changer,' said attorney Dylan Schaffer, who represents the plaintiff in the case. He said this is the first time a judge has ruled the plan's smoke-damage policy illegal and it could ultimately result in the FAIR Plan changing its policy. 'This decision clearly says you can't not pay for these claims. You can't have a policy that doesn't provide coverage for this kind of damage.' Rice also struck down the plan's requirement that smoke damage must be something perceptible rather than detected by laboratory testing. But Schaffer said the plan had already abandoned that provision of its policy since June 2024 after a state Supreme Court ruling in another insurance case. Plaintiff Jay Aliff sued in 2021 after his river-front cabin south of Lake Tahoe was damaged by the Mountain View fire in November 2020. The blaze damaged the roof and broke windows, allowing soot and ash to infiltrate the interior. However, the plan only agreed to pay $2,724.03 after subtracting depreciation and his deductible, even though Aliff claims the on-site adjuster estimated the damage at $7,034, according to his lawsuit. Aliff has since sold the property. The plan amended its fire dwelling policy in 2012, when it added language that said smoke damage must be 'visible to the unaided human eye' or capable of being 'detected by the unaided nose of an average person' rather than being perceptible 'by the subjective senses of (the insured) or by laboratory testing.' Schaffer said that provision led to the rejections of more smoke claims, a problem that escalated after 2016. That was when the FAIR Plan sought approval from the state Department of Insurance for a new policy form that changed the definition of 'direct physical loss' to require 'permanent physical changes.' In seeking approval from the department, the plan told regulators that the new policy language might result in a 'broadening' of coverage, according to the Aliff lawsuit. But after receiving complaints about how the plan was handling smoke-damage claims, state regulators in 2022 conducted a market conduct examination of the plan's smoke-policy language and claims procedure. The report found that in seeking approval of its new definition of 'direct physical loss,' the FAIR Plan 'omitted relevant facts and misrepresented revised language as providing broad or broader coverage than the policy provided previously.' The plan denied its policy was illegal, prompting the department to threaten possible 'administrative action.' The report also found that from Jan. 1, 2017 through March 18, 2021 the plan violated California's Code of Regulations and Insurance Code 418 times. The violations included issuing fire policies that failed to meet state codes, failing to cover all by fires and failing to 'diligently pursue a thorough, fair and objective investigation' of claims, including more than 200 involving smoke damage. Victoria Roach, the plan's president, defended the insurer's handling of smoke-damage claims during an Assembly Insurance Committee hearing this year. She contended that the policy provides adequate coverage, even though it asks policyholders to first try to clean up their own properties. 'Smoke or ash in a house is not necessarily covered if it hasn't damaged anything. Now, sometimes smoke, in and of itself, will damage things, right? It'll damage the walls. It'll damage porous surfaces, a lot of times, the carpets, the couches, the mattresses, things like that. If it's beyond repair, we'll cover it if it needs to be repaired,' she said. The lawsuit originally sought class action status but that request was rejected by Rice in December. In his most recent decision, the judge also ruled that the FAIR Plan did not violate the state's Unfair Competition Law, because it was not proven that Aliff had actually suffered any economic loss due to the policy. Rice admitted this was an 'incongruous' result, but said that was only because it was a high legal hurdle to prove such a matter before trial — and that Aliff may eventually win on this issue at trial. Schaffer said he plans to file additional unfair competition motions with more evidence prior to trial, because a favorable decision on the law would allow him to seek a court injunction forcing the plan to change its smoke-damage policy statewide. That might apply not only to new and outstanding claims, but also to cases closed since 2017, the attorney said. The plan has received thousands of such claims since then, including those from the Jan. 7 fires, he said. Amy Bach, an attorney and executive director of United Policyholders, a San Francisco insurance advocacy group, said the judge's decision was 'profound' and would force the FAIR Plan to change how it handles smoke damage claims aside from any injunction. 'You have a court of law telling the FAIR Plan, what we have been telling them, what people have been telling them, what lawyers have been telling them, what the Department of Insurance told told them: 'Your language is is illegal. You can't use it, and now you're going to have to make it right.'' The losses suffered by Los Angeles County homeowners have spawned multiple lawsuits against insurers and the plan. Schaffer's Oakland-based firm Kerley Schaffer has filed lawsuits against the plan over its smoke damage policy dating back to 2017, including proposed class actions in Alameda and Butte counties. Most recently his firm has teamed with Edelson, a large Chicago-based law firm, to represent victims of the Palisades and Eaton fires who have filed multiple lawsuits against the plan over its smoke damage policy. Other law firms have filed lawsuits over the plan's policies since the Jan. 7 fires. Two lawsuits filed in April accuse hundreds of insurers of colluding to drop policyholders and force them onto the plan, which offers limited policies that typically cost more.
American Military News
20-05-2025
- Business
- American Military News
Insurers seek to surcharge California homeowners for LA County fire costs
Insurers are seeking to charge homeowners across California for some of the costs of the catastrophic Los Angeles County fires the companies were burdened with when the state's insurer of last resort needed a bailout. The California FAIR Plan Association, with the approval of state Insurance Commissioner Ricardo Lara, assessed its member carriers $1 billion on Feb. 11 when the plan was swamped with thousands of claims after the Jan. 7 fires in Pacific Palisades, Altadena and Sylmar. The plan, operated and backstopped by the state's licensed home insurers, said it has made $2.75 billion in claims payments as of Friday and expects its costs for the fires will total $4 billion, which it could not cover with its limited surplus and reinsurance funds. Now, under a policy Lara put in place last year that is being challenged in court, insurers are filing applications with the state Department of Insurance seeking to surcharge their policyholders statewide for half the costs of that assessment. That means even if a person lives hundreds of miles away from the fires, they could be forced to help pay their insurers' costs of the assessment — on top of annual premiums that have risen hundreds or even thousands of dollars for some homeowners as many insurers have sharply raised rates. So far at least 10 home insurers and their affiliates have filed applications for surcharges, with the fees ranging from about $6 or less for some rental policyholders, $20 or $30 for condo owners and typically $40 to $60 for a standard homeowners policy, though some are less or somewhat more. The insurers are seeking to apply the charges starting this year, with some spreading the charges over two annual billing cycles. Among the insurers that have filed applications are affiliates of AAA and Mercury, two of the largest home insurers in the state, and carriers with smaller market share such as Amica and Western Mutual. Lara has final say about whether to allow the surcharges to go through. 'This modest, temporary cost recovery — just a few dollars a month for most policyholders — is critical to preventing a catastrophic collapse of California's insurance market,' said Denni Ritter, vice president for state government relations for the American Property Casualty Insurance Association trade group. Hilary McLean, a spokesperson for the FAIR Plan, said it has no role in determining how its member carriers decide to pay for assessments. While many of the state's licensed home insurers have yet to file applications, most future surcharges could be in a similar range because the FAIR Plan assessed its member carriers based on their share of California's home insurance market. 'That was the ballpark estimate,' said Rex Frazier, president of the Personal Insurance Federation of California, which represents major property and casualty insurers. But Carmen Balber, executive director of Consumer Watchdog, a Los Angeles-based group that filed the suit to stop the surcharges, said that because the application figures are only averages, homeowners with larger policies could end up paying surcharges totaling hundreds of dollars. 'The average doesn't fully represent the impact on many homeowners, and $50 is not negligible for Californians who have already seen massive home insurance premium increases,' she said, adding that this could be the 'tip of the iceberg' if the FAIR Plan further assesses its member carriers. Michael Soller, a spokesperson for Lara, said regulators are reviewing the applications to ensure they follow the rules established by the department regarding which policyholders are being charged, for how much and for what duration. Insurers must break down the charges by their different lines of insurance. 'We also want to understand each insurer's process to prevent overcollection. It's about fairness, transparency and holding insurance companies within legal bounds,' he said. The FAIR Plan got into financial trouble as insurers fled the state's home insurance market, which was hit with a series of devastating fires even before this year, including the 2018 blaze that nearly wiped out the town of Paradise in Northern California. A Times analysis found that in the Palisades and Eaton fire zones, the FAIR Plan's rolls shot up last year a combined 47%. From 2020 to 2024, the number of homes in both areas on the plan nearly doubled from 14,272 to 28,440. Lara's surcharge policy was instituted as part of his Sustainable Insurance Strategy to make the troubled homeowners market more attractive to insurers. It allows insurers to recoup from their policyholders up to half of any FAIR Plan assessment that totals up to $1 billion for residential losses and $1 billion for commercial losses. Any assessments that exceed those limits can be completely passed on to policyholders. Residential customers are not responsible for commercial losses. However, an additional assessment may not be necessary, according to a Feb. 11 letter sent by the plan to Lara seeking permission for the current assessment on its member carriers. The plan said it was running out of money to pay claims after using up $510 million in unallocated funds and drawing money from its $5.78-billion reinsurance program, acquired by the insurer to spread its risk from fires and other catastrophic events. However, it estimated it would have $306 million in cash after the assessments of its members as of June 30. Frazier said that he had 'no reason to believe' there would be another FAIR Plan assessment related to the Jan. 7 fires, but that another major blaze this year could change the calculus. 'I think the worry is what happens next November or December,' he said. McLean said the FAIR Plan 'cannot speculate on losses associated with future disasters.' A bill working its way through the Legislature would authorize the California Infrastructure and Economic Development Bank to issue bonds on behalf of the FAIR Plan to help pay its claims and increase its liquidity. Consumer Watchdog, which called Lara's decision last year to provide for insurer surcharges an 'industry bailout,' sued Lara in April in Los Angeles County Superior Court claiming that nothing in the 1968 statute that created the Fair Plan contemplated such an assessment on policyholders. It also alleged Lara violated state law by approving the assessment policy via 'administrative fiat' rather through the proper rulemaking procedure. A spokesman for Lara at the time said the lawsuit 'serves to undermine our efforts to restore competition to all areas of our state, so people can get off the Fair Plan and back to the regular market.' The American Property Casualty Insurance Association called it a 'reckless and self-serving stunt.' The state's 10 largest home insurers also were sued last month by a group of Jan. 7 fire victims who allege the companies colluded to drop policyholders and force them into the FAIR Plan, where they would pay more for less coverage. That had the effect of reducing the insurers' liabilities after the fires due to the plan's losses. The American Property Casualty Insurance Association called the lawsuit 'meritless.' ___ © 2025 Los Angeles Times. Distributed by Tribune Content Agency, LLC.
Yahoo
17-04-2025
- General
- Yahoo
A California family is suing insurers over denied wildfire claim. Here's how to deal with an insurance dispute
Anne Yates and Patrick Proctor's 13-acre property in Butte County, California survived the devastating Park Fire, which scorched parts of Butte and Tehama counties in July 2024. But when the couple returned to their Cohasset Road home, they realized their house didn't emerge completely unscathed. Ash, smoke and soot had seeped inside the house, leaving behind what Yates and Proctor's lawsuit alleges are toxic residues. Despite the structure still standing, the couple says their home is uninhabitable and their insurer refuses to pay for professional remediation, reports CBS News. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how "The FAIR Plan simply did not conduct an adequate investigation and told them that they should clean the home themselves and move back in," said Dylan Schaffer, the couple's attorney with Kerley Schaffer, LLP. 'And that advice is not only contrary to California law, it's dangerous.' With their insurance claims rejected, Yates and Proctor are now suing the California FAIR Plan Association and the insurance companies that fund it. The FAIR Plan, which stands for Fair Access to Insurance Requirements, is California's fire insurance backstop — designed for homeowners and businesses in high-risk areas that can't get traditional insurance coverage. It's made up of multiple insurers who are legally required to participate and offer minimal coverage for fire-related damage. According to the couple's lawsuit, the FAIR Plan denied the couple's smoke damage claim on the basis that their home wasn't 'damaged' but simply 'dirty.' That's been a long-standing point of contention in wildfire insurance cases across the state. 'The problem with the FAIR Plan,' Schaffer told CBS reporters, 'is that their view — since 2012 and across thousands of wildfire claims — is that these houses are not damaged. They're dirty. And because insurance policies cover damage, not dirt, they don't want to pay to fix them.' Yates and Proctor are asking for reimbursement for smoke remediation and reconstruction work they say is necessary to make the home safe again, potentially starting from the studs. The California Department of Insurance declined to comment on the lawsuit specifically but said it expects insurers to stand by their policyholders. The FAIR Plan has come under scrutiny in recent years as wildfires grow more intense and widespread. While it serves as a last resort for many homeowners in fire-prone areas, critics say the coverage is often too limited, and the plan is even at risk of running out of money. Read more: The US stock market's 'fear gauge' has exploded — but this 1 'shockproof' asset is up 14% and helping American retirees stay calm. Here's how to own it ASAP Wildfires, hurricanes and floods can leave lasting damage to your home, even when the walls are still standing. If your insurer denies a claim after such an event, don't assume the story ends there. Here are some steps homeowners can take to protect themselves before and after a natural disaster. Before disaster strikes, review your homeowner's insurance policy closely. Make sure it includes coverage for fire, smoke and additional living expenses if your home becomes uninhabitable. In high-risk areas, supplemental policies may be needed to cover losses not included in basic plans, such as fire and flooding. As soon as it's safe to return, take photos and videos of everything — inside and out — and keep records of any professional assessments, such as air quality tests or contractor quotes, that show the extent of the damage. Public adjusters work on your behalf (not the insurance company's) to assess damage and negotiate claims. They charge a fee — often a percentage of your settlement — but can help maximize your payout. If you believe your claim has been unfairly denied, an attorney with experience in insurance disputes can advise you on next steps. In California, insurers are required by law to act in good faith and handle claims fairly. Denying a legitimate claim without a proper investigation may be grounds for legal action. As climate change increases the frequency and intensity of natural disasters, having the right insurance coverage isn't optional — it's essential. If you live in a high-risk area, talk with your agent about specific protections for wildfires, floods, earthquakes and temporary housing. The right type of coverage could make all the difference when facing the aftermath of a natural disaster. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 5 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
