Consumer Watchdog, a consumer advocacy group, filed a lawsuit against the California Insurance Commissioner and the California Department of Insurance in April 2025. The lawsuit challenged two bulletins (2024-8 and 2025-4) issued by Lara, which allowed insurance companies participating in the California FAIR Plan to impose surcharges on policyholders to recover costs from wildfire-related assessments.

The FAIR Plan is California’s insurer of last resort, designed to provide fire insurance for those unable to secure coverage in the traditional market, with costs traditionally shared among insurers based on their market share, not passed to consumers.

Consumer Watchdog argued that these surcharges were unlawful, violating the California Administrative Procedure Act (APA) and FAIR Plan statutes. They claimed the bulletins were issued without proper public notice or legislative approval and that the FAIR Plan statute requires insurers, not policyholders, to bear these costs. The lawsuit sought to block the surcharges, declare the bulletins invalid, and require insurers to refund any collected fees.

On July 22, 2025, Los Angeles Superior Court judge, James C. Chalfant, issued a ruling that partially dismissed the case. The court upheld Lara’s authority under Proposition 103 to issue the bulletins, dismissing two procedural claims related to violations of the APA.

However, the judge allowed the core claim – that the surcharges violate the FAIR Plan statute by improperly shifting costs to policyholders – to proceed. This was seen as a significant procedural victory for Consumer Watchdog, ensuring judicial scrutiny of the surcharge scheme.

Insurance Commissioner Lara issued a press release claiming the ruling affirmed his authority to protect consumers and stabilize the FAIR Plan, which Consumer Watchdog in it’s press release called misleading, as the court explicitly allowed the challenge to the surcharges’ legality to move forward.

“The court rejected the Department’s attempt to throw out the core of the lawsuit, finding that Consumer Watchdog may proceed with its claim that the pass-through surcharges violate California’s FAIR Plan statutes. The FAIR Plan is California’s last-resort fire insurance program, and the law requires insurers to share costs equally-not shift them to consumers.”

“This is a significant procedural victory that ensures the Commissioner’s arrangement, which could shift hundreds of millions of dollars from homeowners to insurers will get the scrutiny it deserves,” said William Pletcher, Consumer Watchdog’s Director of Litigation. “California consumers should not be forced to subsidize insurance companies when the law makes clear the amounts must be paid by insurers, not policyholders.”

The case was not fully dismissed; while two procedural claims were dropped, the central challenge to the legality of the FAIR Plan surcharges is ongoing, with Consumer Watchdog continuing to argue that the policy violates state law and harms consumers.

“This ruling means the Commissioner’s legally unsupported surcharge plan will now be tested in court,” said Ryan Mellino, who argued the case for Consumer Watchdog. “The law doesn’t allow insurers to profit from the FAIR Plan while pushing their losses onto the people they’re supposed to insure. This fight is just beginning – and we intend to prove in court that the Commissioner’s plan isn’t just unlawful, it’s a betrayal of the very consumers he’s supposed to protect.”

The American Property Casualty Insurance Association supported Lara, arguing that blocking the surcharges could destabilize the insurance market, while Consumer Watchdog maintained that the surcharges unfairly burden consumers and protect insurer profits.