Lawsuit Challenges California’s Fire Insurance Mandate

(CN) – An insurance collective is suing California's insurance commissioner, claiming its new mandate to make coverage more accessible to those in wildfire-prone areas will force cost increases.

California’s insurance industry pays into a fund called the California Fair Access to Insurance Requirements (FAIR) Plan, which provides wildfire coverage to those who have lost it or can’t afford it. Californians must purchase other types of coverage — such as protection against floods or theft — through the private market.

But last month, state insurance commissioner Ricardo Lara ordered FAIR to offer comprehensive insurance, hoping to save policyholders the burden of purchasing multiple plans.

According to FAIR’s lawsuit, filed Friday in the Central District of Los Angeles Superior Court, that directive is a no-go.

FAIR says that the mandate is illegal because it interferes with FAIR’s plan to encourage “maximum use” of the private insurance market.

But Lara told AP News the lawsuit was “industry driven” and vowed to “protect consumers.”

“Insurers can’t have it both ways,” Lara said. “They cannot continue to cancel policyholders at an alarming rate, leaving them with the FAIR Plan as their only option, with woefully inadequate coverage.”

The Associated Press reports that private insurers dropped coverage for 350,000 policyholders in wildfire-prone areas since 2015.

Several years of devastating wildfires have undercut profitability for California's insurers. According to the California Department of Insurance, the state’s insurance companies paid out $1.70 for every $1 collected in premiums last year.

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