California Commissioner Takes Action Against FAIR Plan for Smoke Damage Claims

California Insurance Commissioner Ricardo Lara is taking legal action against the California FAIR Plan Association for reportedly denying and limiting smoke damage claims from wildfire survivors.

The California Department of Insurance filed an order to show cause against the FAIR Plan after receiving consumer complaints smoke damage claims denials the CDI says was based on FAIR Plan-defined requirement for “permanent physical damage.”

Related: California Surplus Lines Take-Up Soars as Brokers Work to Find Coverage for Clients

The legal filing builds on a multi-year investigation, which the CDI said uncovered at least 418 violations of California’s consumer protection laws.

In an unrelated matter, the CDI is also conducting a market conduct examination of State Farm for its handling of claims from the wildfires in Los Angeles. The examination will assess whether State Farm complied with California’s consumer protection and claims handling laws, according to Lara.

The CDI said it has received general allegations from wildfire survivor groups regarding State Farm’s processing of claims. One area of concern relates to how some insurers, including State Farm, are handling smoke damage claims, according to the CDI.

Related: Viewpoint: Smoke Damage from LA Wildfires Leaves Questions to Be Answered

Lara’s legal action against the FAIR Plan cites violations of California Insurance Code section 790.03 including:

• Misrepresenting policy terms
• Failing to investigate claims fairly
• Denying legitimate claims without reasonable basis

Lara and the CDI recently created a Smoke Claims & Remediation Task Force to develop statewide standards for investigating and remediating smoke damage.

Topics California Claims