By Laurence Darmiento, LOS ANGELES TIMES
Residential policyholders across California could be paying several hundred million dollars to help cover the costs of claims arising out of the January firestorms in Los Angeles County.
Multiple insurers, including State Farm General, the largest in California, have received approval from the Department of Insurance to charge their customers for a portion of a $1-billion assessment they were hit with due to the financial problems of the state’s insurer of last resort.
Surcharges that have been approved for some large insurers so far total more than $150 million, with an average of about $50 for a standard homeowner’s policy (HO-3), depending on the carrier.
The charge can be more or less according to the size of the premium and is split into monthly payments that can be spread over two years.
The California FAIR Plan Assn., operated and backed by the state’s licensed home insurers, was overwhelmed with an estimated $4 billion in residential and commercial claims stemming largely from the Palisades and Eaton fires that damaged or destroyed nearly 13,000 homes.
Unable to pay those claims, it assessed its member carriers the $1-billion charge in February, half of which they could seek to recoup from their residential and business customers across the state under regulations enacted last year by Insurance Commissioner Ricardo Lara.
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That surge left the FAIR Plan with a dramatically higher financial exposure, and prompted Lara to push through regulations last year that allowed for the policyholder surcharges. The plan also recently sought a 36% rate hike.
Consumer Watchdog, a Los Angeles advocacy group, has called the surcharges an illegal industry bailout. It sued Lara in April, alleging that nothing in the statute creating the FAIR Plan contemplated a policyholder surcharge.
It also contended the regulation was approved by “administrative fiat,” rather than through the proper rule-making procedure. The group calculates that insurers have sought to recoup about $425 million from residential and commercial customers due to this year’s assessment.