The California FAIR Plan Association (FAIR Plan) has said it will appeal a Los Angeles Superior Court decision that the association says will result in unnecessary rate increases for all policyholders on the FAIR plan and unnecessarily expand the role of the FAIR plan in the voluntary insurance market.
The FAIR plan also plans to seek a stay of the California Insurance Commissioner’s order issued on September 24, which orders the plan to offer a home insurance policy, in addition to its current home fire coverage. , with more traditional features for homeowners, such as coverage for water damage, theft and loss of use.
The Fair Plan, with approximately 200,000 policyholders, serves as the state’s property insurer of last resort; all property insurance companies admitted in the state are members of the association.
In July 2021, the Los Angeles Superior Court ruled that the California Department of Insurance (CDI) exceeded its legal authority in 2019 by ordering the FAIR plan to provide comprehensive homeowners insurance, known as the HO- policy. 3. This decision, however, left the door open for CDI to order the FAIR plan to provide further new coverage.
Subsequently, the CDI issued Order No. 2021-2 requiring the FAIR scheme to provide a quasi-HO-3 policy that would offer less coverage than full home insurance while requiring the FAIR scheme to offer new ones. types of coverage.
The FAIR plan appeals the part of the decision that the CDI has the power to order the FAIR plan to provide new coverage that is already available to consumers from other insurance providers in the voluntary market.
In a press release, Anneliese Jivan, president of the California FAIR Plan, said: “Ultimately, the order from the California Department of Insurance would place a greater financial burden on current FAIR Plan customers, regardless of whether they were. the means or not. The FAIR plan was created to provide California homeowners with the basic fire insurance coverage they need, when they need it most. The FAIR plan was never designed to compete with traditional insurance companies that already offer these coverage options. We are appealing the ruling and challenging the latest CDI order aimed at protecting consumers from unnecessary tariff increases. “
California law requires the FAIR plan to provide basic property insurance to homeowners who cannot purchase insurance in the voluntary market, serve as a stabilizing force in the insurance market, and maintain healthy actuarial rates. The FAIR plan said its unique role as a last resort for fire insurance is analogous to that of the California Earthquake Authority, which exists to meet consumer needs for a specific line of insurance when the voluntary market cannot. does not or does not want to provide it.
According to the association, requiring the FAIR plan to extend to readily available coverage would put the FAIR plan in direct competition with the voluntary market, which is illegal. Additionally, forcing the FAIR plan to offer new coverage would result in higher rates for existing FAIR plan policyholders and a significantly more expensive product than what is available from traditional insurers.
The September 24 CDI order attempting to force the FAIR plan to offer a quasi-HO-3 policy would still result in clients needing additional coverage to have the equivalent of an insurance policy. complete home, or the equivalent of a FAIR plan plus a difference policy. in the conditions policy, according to the association. Specifically, the CDI-ordered quasi-HO-3 policy would leave policyholders without certain types of important liability coverages found in a comprehensive policy, requiring a second policy outside of the FAIR plan.
Coverage options known as difference in terms policies are readily available in the voluntary market, as noted on CDI’s website. A FAIR Plan policy along with a Difference in Terms policy offers the equivalent of an HO-3 policy. Any homeowner can work with their insurance broker to obtain these coverages.
FAIR Plan said it does not have the infrastructure or expertise to offer lines of insurance outside of basic property coverage. If forced to focus on creating new lines of insurance, the FAIR plan would have to divert resources away from its core services, slowing aid to victims of devastating fires statewide, said association.
Source: California FAIR Plan
The most important insurance news, delivered to your inbox every business day.
Receive the trusted insurance industry newsletter