The California Insurance Commissioner announced formal legal action against the California FAIR Plan Association (FAIR Plan), the state’s insurer of last resort operated by the insurance industry, for systematically denying and limiting smoke damage claims from wildfire survivors – particularly in the wake of the Palisades and Eaton Fires earlier this year.
The California Department of Insurance filed an Order to Show Cause against the FAIR Plan after consumer complaints showed a pattern of denying smoke damage claims based on an arbitrary FAIR Plan-defined requirement for “permanent physical damage.” The Department’s legal filing follows hundreds of escalating consumer complaints filed with the Department against the FAIR Plan and builds on a multi-year investigation, which uncovered at least 418 violations of California’s consumer protection laws.
“I’ve spoken with wildfire survivors who would rather lose their homes to flames than endure the stress and confusion of navigating smoke damage claims. This is unacceptable. This issue has persisted after every fire and has become even more urgent in the aftermath of the largest urban fires in history, the Palisades and Eaton fires. These consumers’ message is clear: they need assistance, not obstacles,” said Commissioner Lara. “We will not tolerate insurance companies breaking the law and denying Californians the coverage they deserve, including the FAIR Plan.”
This enforcement action is part of a broader effort led by Commissioner Lara to strengthen consumer protections through oversight, examination, and enforcement across both traditional insurance carriers and the FAIR Plan. The Department is also conducting a Market Conduct Examination of State Farm for its handling of consumers’ wildfire claims.
The California FAIR Plan is operated by the insurance industry, not the state. State law requires all property insurance companies doing business in California to participate in the Fair Access to Insurance Requirements (FAIR) Plan, which provides basic fire insurance coverage when homeowners and businessowners cannot find it in the traditional market. It was first created after the Watts Riots of 1965 and resulting major wildfires. It is designed as a temporary safety net – not a long-term solution.
The Department of Insurance has regulatory oversight of the FAIR Plan to ensure it complies with state law and treats policyholders fairly – the FAIR Plan is not exempt from consumer protection and claims handling requirements in California law.
Commissioner Lara’s legal action cites violations of California Insurance Code section 790.03 including, but not limited to:
– – Misrepresenting policy terms
– – Failing to investigate claims fairly
– – Denying legitimate claims without reasonable basis
Commissioner Lara expects to file in the coming weeks the Department’s Report of Examination for an ongoing financial examination of the FAIR Plan, including its compliance with recommendations from the Department’s 2022 Operational Assessment Report. The 2022 report called for significant changes in the FAIR Plan’s governance, operations, underwriting and claims handling, risk management, customer service, and financial planning strategies and policies.
Commissioner Lara has also created the Smoke Claims & Remediation Task Force to develop statewide standards for investigating and remediating smoke damage—a gap that has existed for decades. To date, the Department has helped recover more than $74 million for wildfire survivors through formal complaint intervention.
Consumers who believe their smoke damage claim was unfairly denied or delayed are encouraged to file a complaint at insurance.ca.gov or call 800-927-HELP.