Los Angeles, CA — Consumer Watchdog respectfully acknowledges today’s trial court ruling but strongly criticizes Insurance Commissioner Ricardo Lara’s decision to authorize FAIR Plan surcharges on policyholders of other insurers—not FAIR Plan policyholders—and said it is reviewing legal options.
“Commissioner Lara has again sided with insurance companies over the consumers he was elected to protect,” said William Pletcher, Litigation Director for Consumer Watchdog. “We disagree with the court’s decision and are reviewing options to continue protecting California consumers from these unlawful surcharges.”
The challenged bulletins allow insurers to collect hundreds of millions from homeowners, renters, and condominium owners who are policyholders of private insurers—not FAIR Plan policyholders—to reimburse FAIR Plan assessments tied to the Los Angeles wildfires. These charges are imposed on policyholders who receive no FAIR Plan coverage or benefit.
“Policyholders of other insurers should not be subsidizing insurance company losses under the FAIR Plan to the tune of hundreds of millions of dollars.” Pletcher said. “These surcharges shift insurers’ costs onto California families who are not FAIR Plan customers and conflict with protections established by Proposition 103 and the FAIR Plan statutes.”
Consumer Watchdog argued that the FAIR Plan Act requires member insurers—not policyholders—to bear their share of assessments and that the Commissioner exceeded his authority by allowing insurers to pass those costs to consumers.
The organization said the case raises important questions about the Commissioner’s authority under Proposition 103 and the FAIR Plan Act that warrant further review.
“This case is about who should bear the cost of California’s insurance crisis,” Pletcher said. “Commissioner Lara sent the bill to policyholders of other insurers instead of requiring insurers to absorb obligations assigned by the Legislature. We believe California law requires a different result.”
Consumer Watchdog will review the decision and consider appellate and other legal options.
Background on Insurers and Market Context
Major insurers operating in California and nationally include State Farm, Allstate, Farmers Insurance, Liberty Mutual, and USAA. These companies are among the market leaders in homeowners and property insurance and are members of the FAIR Plan, which serves as the insurer of last resort for high-risk properties.
The FAIR Plan itself is not a traditional insurer but a state-mandated pool funded by these member companies. When losses exceed its reserves, member insurers are assessed based on their market share.
