California Department of Insurance Issues Revised Plan of Operation for FAIR Plan

December 19, 2019

Editor’s note: This story has been updated with comments from a FAIR Plan official.

The battle between the California Department of Insurance and the FAIR Plan will continue to rage on in the wake of two severe wildfire seasons.

The CDI today issued a revised plan of operation for the California FAIR Plan Association, which furthers California Insurance Commissioner Ricardo Lara’s Nov. 14 order revoking portions of the FAIR Plan’s current plan of operation and ordered the insurer of last resort to make changes to the plan.

The FAIR Plan is required under Insurance Code section 10095(f) to submit a plan of operation within 30 days of the Nov. 14 order.

The FAIR Plan didn’t do that, but decided to sue the CDI instead.

The FAIR Plan last week filed a petition for a writ of mandate seeking to have a court annul, vacate, or withdraw an order issued last month by the Lara calling for the Fair Plan to begin offering a comprehensive homeowners (HO-3) coverage, in addition to its current dwelling fire-only coverage, by June 1, 2020.

Lara said he is taking the action to help homeowners find adequate coverage to protect their homes by ordering the FAIR Plan to offer a comprehensive policy, HO-3 coverage, in addition to its current dwelling fire-only coverag, with traditional homeowner features, such as coverage for water damage and personal liability.

The revised plan also requires the FAIR Plan to expand its coverage limits from $1.5 million to $3 million and to offer consumers a monthly payment plan and the ability to pay by credit card or electronic funds transferall without fees.

“My Department issued this revised plan of operation to show we are moving forward as required by law to protect homeowners throughout the state,” Lara said in a statement . “The FAIR Plan has become the only permanent option for many homeowners abandoned by the private insurance market. This plan will provide homeowners with the option of basic coverage they deserve in order to feel safe and protect our local economies from the state’s growing insurance availability crisis.”

A FAIR Plan spokesperson emailed the following response to the CDI’s latest move on behalf of fFAIR Plan Association President Anneliese Jivan:

“The FAIR Plan has been providing access to basic property insurance for every Californian who needs it for over 50 years, and we have never turned a homeowner away because of the risk of wildfire. We are doing everything we can to protect our policyholders and ensure their continuing access to affordable and reliable basic property coverage.”

The statement notes that the commissioner’s efforts to expand homeowner access to insurance, are appreciated.

“Unfortunately, attempting to force the FAIR Plan to provide an HO-3 policy would make matters worse – by diverting critical resources away from work that is underway to benefit our existing customers, by raising rates on California homeowners and by destabilizing the voluntary insurance marketplace,” the statement reads.

The new plan of operation requires the FAIR Plan to file a rate application for the HO-3 coverage option only for review and approval by the CDI. The FAIR Plan may also file any rate or rule application necessary to implement the increased $3 million maximum limits of liability.

According to the CDI, HO-3 coverage will save consumers from having to purchase a second companion policy to cover other hazards such as liability, water damage, and theft.

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