The California FAIR Plan Association (CFPA), established under the Basic Property Insurance Law (Ins. Code, §§ 10090–10100.2) as the state’s insurer of last resort, challenged an order issued by Insurance Commissioner Ricardo Lara on September 24, 2021 (Order No. 2021-2). The order directed CFPA to amend its plan of operation to offer a “Homeowners Policy” that included, among other coverages, premises liability and incidental workers’ compensation – elements not part of CFPA’s existing dwelling fire policy.
CFPA petitioned the Los Angeles County Superior Court for a writ of mandate to vacate the order, arguing that the Commissioner lacked authority under the statute to mandate liability coverage, as “basic property insurance” is limited to first-party coverage against direct loss to real or tangible personal property.
The superior court denied the petition, finding the statutory definition ambiguous and deferring to the Department of Insurance’s (DOI) interpretation, which permitted liability coverage if it had some connection to the property.
On appeal, the central issue was whether Insurance Code section 10091, subdivision (c), authorizes the Commissioner to expand “basic property insurance” to include liability coverage. The California Court of Appeal ruled that it did not, and reversed the trial court In the published case of California FAIR Plan Association v. Lara -B336043 (December 2025).
The statute defines the term as “insurance against direct loss to real or tangible personal property at a fixed location . . . from perils insured under the standard fire policy and extended coverage endorsement, from vandalism and malicious mischief, and includes other insurance coverages as may be added with respect to that property.” The court agreed the phrase “other insurance coverages . . . with respect to that property” is ambiguous, as it could plausibly refer to additional first-party perils or broader coverages, including liability.
However, after examining extrinsic aids, the court concluded the Legislature intended “basic property insurance” to encompass only first-party property coverage. The law was enacted in 1968 amid instability in California’s property insurance market, triggered by urban riots (e.g., Watts in 1965) and wildfires, which left property owners in high-risk areas unable to obtain basic fire insurance. It mirrored the federal Urban Property Protection and Reinsurance Act of 1968, which incentivized states to create “FAIR” (Fair Access to Insurance Requirements) plans to ensure residual market access for property risks, not liability.
The statute’s express purposes (§ 10090) – stabilizing the property insurance market, assuring availability of basic property insurance, encouraging maximum use of the normal market, and equitably distributing responsibility among property insurers – all align with first-party property risks.
Expanding to liability would undermine these goals by distorting CFPA’s role as a backstop, disincentivizing voluntary market use (where liability via Difference in Conditions policies is readily available), and unfairly burdening non-property insurers.
The court further held that deference to DOI’s interpretation was unwarranted under Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1. DOI’s 1972 report to the Legislature, contemporaneous with enactment, confirmed the law’s narrow focus on property insurance. Its 1994 shift – approving CFPA’s Businessowners Policy with liability coverage – was not consistently maintained, lacked formal rulemaking, and rested on flawed reasoning solicited to avert legislative intervention after the 1992 Los Angeles riots. DOI possessed no comparative interpretive advantage, as the issue turned on statutory construction rather than technical expertise.
The judgment was reversed, and the matter remanded with directions to grant the writ and vacate Order No. 2021-2. CFPA was awarded costs on appeal.