The battle over California fire insurance policies escalates

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SACRAMENTO, Calif. (AP) — Massive wildfires are making it harder for some California homeowners to get homeowners insurance, pitting the state’s insurance commissioner against the industry in a growing dispute that will likely stretch to in the 2022 statewide elections.

Private insurance companies often don’t sell policies to people who live in wildfire-prone areas because the risk is too great. When this happens, state law requires these companies to pool their money to provide coverage for people who cannot purchase policies because of where they live.

This pool — the California Fair Access to Insurance Requirements Plan — only sells fire insurance, often requiring homeowners to purchase a separate policy for things like liability. Insurance Commissioner Ricardo Lara, a Democrat, ordered the pool, also known as the FAIR plan, to sell more than just fire insurance. He says this will save owners the money and hassle of having to purchase multiple plans.

But companies funding the FAIR plan say that’s not true, arguing that ordering Lara will drive up costs for consumers. They say his order is “illegal” because it would put them in direct competition with the private insurance market. On Thursday, they asked a judge to block Lara’s order while they appeal a lower court’s ruling earlier this year ordering them to comply.

“The FAIR Plan was never designed to compete with traditional insurance companies that already offer these coverage options,” said FAIR Plan President Anneliese Jivan, adding that she hopes to “protect consumers from increases unnecessary rates”.

Lara accused the insurance industry of “once again putting profits ahead of the needs of California consumers.”

“Forcing its policyholders to purchase separate liability and contents insurance policies, often from the same insurance companies that dropped their coverage in the first place, only drives up the price for consumers,” said Lara, who will be re-elected next year. . “The goal of the FAIR plan is to take all comers. I think it’s not fulfilling its purpose and mission to be there for consumers when they need it most.

Since 2018, California has experienced more than 32,700 wildfires that have destroyed more than 38,400 structures and burned more than 13,220 square miles (34,239 square kilometers), according to the California Department of Forestry and Fire Protection. From 2015 to 2019, state data shows insurance companies refused to renew nearly 350,000 policies in high wildfire risk areas. This data does not include information on how many people were able to find coverage elsewhere or at what cost.

California’s FAIR plan was created in 1968, one of many such pools that sprung up across the country as a result of the damage caused by urban uprisings during the civil rights movement. As of 2020, 31 states plus the District of Columbia offer FAIR plans, according to the Insurance Information Institute.

Since 2019, Lara has been trying to get California’s FAIR plan to sell more comprehensive coverage. At the time, he ordered the pool to sell traditional home insurance policies that cover a range of losses other than fire.

In July, a judge ruled that Lara had the power to order the FAIR plan to sell insurance policies that also cover liability, but only if the liability relates to the property itself. Liability coverage is when someone gets hurt on the property and it’s the owners fault.

The FAIR plan says that even if it starts selling these modified insurance plans, it still won’t be enough to cover everything included in a traditional home insurance policy. This means owners should always purchase a second insurance plan for full coverage.

“Commissioner Lara is trying to place an even greater burden on homeowners by forcing the FAIR plan to provide high-cost comprehensive policies, rather than trusting Californians to get the best deal on the coverages they need through products available on the voluntary insurance market. said Spencer Kook, attorney for FAIR Plan.

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