Los Angeles, CA – On April 17, 2026, Consumer Watchdog filed its opening trial brief in its lawsuit challenging Insurance Commissioner Ricardo Lara and the Department of Insurance’s decision to permit private insurance companies to charge their own policyholders for the costs of the California FAIR Plan, arguing that Commissioner Lara had no authority to allow insurance companies to make California homeowners pay over $400 million to FAIR Plan member insurers.
At issue is a fundamental reallocation of FAIR Plan risk. Commissioner Lara is forcing non-FAIR Plan policyholders to absorb costs that the law assigns to insurers. In short, consumers are being charged for insurance company expenses.
Download the brief. (opens in new tab)
The California FAIR Plan was created in 1968 to provide basic property insurance for Californian consumers unable to obtain insurance in the traditional market. The FAIR Plan is a private entity operated by its member insurance companies, which writes policies and collects premiums. By law, those member companies are required to share proportionally in both the profits and expenses of the FAIR Plan. If the FAIR Plan runs short on funds, it can issue an “assessment” to its member companies.
There is no provision in the FAIR Plan law to allow insurers to pass-through charges for the assessments to their own, non-FAIR Plan customers.
But under two bulletins issued by Commissioner Lara in 2024 and 2025, insurers are now permitted to do exactly that and California consumers are on the hook for assessments issued by the FAIR Plan. This dispute is not hypothetical: after approving a $1 billion FAIR Plan assessment in February 2025, Commissioner Lara approved over $420 million in consumer pass-through requests made by FAIR Plan member insurers. Millions of Californians are now seeing a new surcharge appear on their bill, despite not being FAIR Plan members and receiving no coverage or benefit.
In its brief, Consumer Watchdog argued that:
“The fee pass-throughs operate in substance as a tax on consumers to subsidize that liability. The FAIR Plan Statutes explicitly assign all expenses and losses, including assessment costs, to FAIR Plan member insurers as part of a symmetrical structure wherein the insurers also receive all profits of the FAIR Plan. The Department’s scheme [] charges ordinary homeowners and renters for a financial obligation imposed by statute on insurers, with no corresponding benefit to those consumers for the surcharge. It effectively makes California consumers reinsurers of the companies they are insured by.”
Rather than argue that the FAIR Plan Statutes permit the surcharges, Commissioner Lara claims that Proposition 103, a consumer protection initiative passed by the voters in 1988, authorizes them. Consumer Watchdog’s brief explains that Proposition 103 actually does the opposite: it was enacted to protect consumers from exactly this kind of arbitrary cost-shifting, and requires that any charges imposed on policyholders be lawful, justified, and subject to transparent public review and scrutiny.
The shift comes as the FAIR Plan has expanded dramatically under Commissioner Lara, with enrollment doubling in recent years and continuing to surge—adding more than 20,000 policies in just the last quarter of 2025 alone. That growth has coincided with insurer pullbacks and a rapid increase in reliance on the FAIR Plan. Instead of addressing the causes of that expansion, the Commissioner is offloading the resulting costs onto non-FAIR Plan policyholders—forcing policyholders who are not in the FAIR Plan to pay for their own insurer’s obligations. That cost shift is not authorized by the FAIR Plan statutes and is exactly the kind of arbitrary insurance charge Proposition 103 was enacted to prevent.
“Commissioner Lara is giving insurance companies a handout worth hundreds of millions now, and potentially billions in the future” said Consumer Watchdog staff attorney Ryan Mellino. “These surcharges are contrary to the law and harmful to California homeowners and renters. We will continue fighting to defend the pocketbooks of Californians against this unjustified pass-through of insurance company costs.”
The case is set for trial on June 30, 2026 at 9:30 A.M. in Department 85 (to be renumbered to Department 834 in May 2026) of the Stanley Mosk Courthouse in downtown Los Angeles. The case number is 25STCP01367.
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