FAIR Plan Insurance Criticized for Costs, Lack of Coverage in Insurance Commissioner Hearing

SACRAMENTO, Calif. (KGO) – In California, if no insurance company will sell you a homeowner’s policy, you can get coverage through the California FAIR Plan. This insurer of last resort is a state-authorized association run by insurance companies. Plagued by problems, an investigative hearing was held in Oakland on Wednesday. The Insurance Commissioner aired the complaints about the FAIR plan. Most focused on high prices and modest coverage, but just like in an insurance policy, much of the important stuff is in the fine print and overlooked details.

California Insurance Commissioner Ricardo Lara made it clear where he stood at the start of the investigative hearing: California’s FAIR plan needs to change.

“We are here today,” he said, “because of our continued concerns that the FAIR plan is falling short of its mission to ensure access and availability of insurance for Californians who need it.”

The hearing showed how complicated and expensive it has become to insure a home through the FAIR plan. FAIR plan representatives responded by pointing out that they cover the most expensive properties to insure.

Victoria Roach is president of California FAIR Plan: “California FAIR Plan is committed to providing consumers with basic property insurance when such insurance is not available in the normal marketplace.”

A recurring theme that can cost consumers dearly today. United Policyholders Amy Bach had this to say about FAIR Plan’s smoke damage payment policy.

“The FAIR Plan must begin properly processing smoke damage claims and paying for necessary mitigation and restoration quickly and fairly,” Bach said.

The FAIR plan has been criticized (if you will) for separating smoke damage and fire damage in its policies. Sarah Mapel owned a home in Boulder Creek in 2020 when fires broke out at the CZU Lightening Complex. She had FAIR Plan coverage.

“There was soot and debris in the air, it was rancid. Terrible smell throughout the home,” Mapel said. “They told me to clean it myself.”

Mapel filed the lawsuit with her Oakland-based attorney, Dylan Shaffer.

“Carriers have very smart underwriters, very smart lawyers,” Shaffer said, “and they’re constantly … constantly coming up with new and creative ways to avoid these kinds of benefits.”

On Monday, Consumer Watchdog issued a report saying that FAIR Plan-style smoke regulations are also being introduced to the private insurance market.

“We were surprised to find provisions in these insurance policies that say they limit coverage for smoke damage,” says Harvey Rosenfield of Consumer Watchdog. “California law is very clear, there is no separate limitation for smoke damage.”

The California FAIR Plan says it follows all laws. So what should users do? Check your policy for language that limits payments for smoke damage. It will take some time to work its way through the insurance commission and the courts.

Check out more stories and videos from Michael Finney and 7 On Your Side.

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