Insurance Commissioner Ricardo Lara won a round when a judge denied the California FAIR Plan Association’s bid to vacate Lara’s 2021 order that the association offer a homeowners policy with coverage for water damage, theft and loss of use in addition to the current dwelling fire damage.
In the Los Angeles Superior Court petition, the Fair Plan maintained the Sept. 24, 2021, directive was “the commissioner’s attempt to require the FAIR Plan to sell his novel homeowners’ policy is contrary to the express goals underlying the FAIR Plan Act to assure stability in the property insurance market for property located in the state of California.”
Judge Curtis A. Kin heard arguments on Nov. 16 and took the case under submission before ruling Monday denying the FAIR Plan’s petition.
Lara’s office issued a statement regarding the FAIR Plan’s legal action shortly after it was brought in October 2021.
“The insurance industry running the FAIR Plan is once again putting its profits ahead of the needs of California consumers,” the statement read. “Forcing its policy holders to purchase separate insurance policies for liability and contents, often from the very same insurance companies who dropped their coverage in the first place, only drives up the price for consumers.”
The FAIR Plan’s purpose is to take all comers and Lara believes it is “falling short of its purpose and mission to be there for consumers when they need it most,” according to the statement, which further said that Lara will “not let up until Californians have the coverage options they need.”
But according to the FAIR Plan petition, by issuing his order Lara had “failed to consider the significant costs that will be incurred by the FAIR Plan in having to comply with this order and the harm that will result to FAIR Plan customers, FAIR Plan employees and the insurance industry.”
The FAIR Plan is a joint association formed by insurers licensed to write basic property insurance. Lara’s order directs the FAIR Plan to submit a revised plan of operations to the Department of Insurance within 30 days.
Lara’s directive will give about 200,000 Californians who currently rely on the FAIR Plan to protect their homes a more comprehensive option besides the bare-bones coverage that the FAIR Plan currently offers Tuesday, according to a statement from Lara’s office.
In addition, requiring the FAIR Plan to offer a more comprehensive homeowners’ policy “will save consumers from having to purchase a second companion policy to cover other hazards such as premises liability, water damage and theft,” according to Lara’s office.
But according to the petition, requiring the FAIR Plan to offer the type of homeowners’ policy specified will “severely impact and destabilize the normal insurance market for comprehensive homeowners’ (basic) policies.”
“Before requiring the FAIR Plan to offer this novel policy, it was incumbent upon Lara to conduct the necessary factual investigation and analysis to determine the bases for requiring the FAIR Plan to offer this policy and whether it supports the goals of the Act,” the FAIR Plan attorneys argued in their court papers. “Lara failed to do so.”
Lara’s order also is unlawful because it requires the FAIR Plan to offer liability coverages even though it is only permitted to sell basic property insurance, the plan’s lawyers further maintained in their court papers.