California's insurance commissioner, Ricardo Lara, has ordered the FAIR Plan to offer a comprehensive policy in addition to its current dwelling fire-only coverage by June 1, 2020, with traditional homeowner features, such as coverage for water damage and personal liability.
Commissioner Lara also ordered the FAIR Plan to increase coverage limits and to offer a no-fee monthly payment plan as well as allow policyholders to pay by credit card or electronic funds transfer without any fees.
In a statement, Commissioner Lara explained that the growing unavailability of homeowners' and fire insurance has touched virtually every county in the state and threatens home values, real estate transactions, tax revenues, emergency services, and the integrity of California communities.
"I am taking this action after meeting with thousands of California homeowners across the state who are struggling to find coverage to protect their homes," said Commissioner Lara. "People forced to use the FAIR Plan as temporary insurance deserve the same coverage provided by traditional insurers. This crisis requires the FAIR Plan to provide a comprehensive option for Californians who have no other option for homeowners' insurance."
Effective April 1, 2020, the FAIR Plan will increase the combined dwelling coverage limit from $1.5 million to $3 million. The commissioner explained that increasing the FAIR Plan's dwelling coverage limit made sense in today's real estate market in California. In many areas where people are forced to turn to the FAIR Plan for coverage, they find the $1.5 million coverage limit is not enough and need to find additional coverage, often through the surplus lines market.
The commissioner also ordered the FAIR Plan to offer consumers a monthly payment plan and to be able to pay by credit card or electronic funds transfer – all without fees.
The FAIR Plan is established under California law as homeowners' "insurer of last resort." In the commissioner's view, requiring the FAIR Plan to offer a comprehensive homeowners' policy, known as HO-3 coverage, will save consumers from having to purchase a second companion policy to cover other hazards such as liability, water damage, and theft. While the FAIR Plan is intended as a temporary solution, the commissioner said that it was important that its product mirrors traditional coverage as much as possible. Many of the affected California homeowners already have been inconvenienced by planned power outages by utilities, mandatory evacuations, and repeated wildfire threats year after year. Requiring these same homeowners to have to piece together multiple policies to achieve full coverage is needlessly burdensome, according to the commissioner.
"Restoring stability to the homeowners' and fire insurance marketplace will take everyone working together to find solutions," said Commissioner Lara. "By involving homeowners, advocates, local and state government, and insurance companies, I am confident we will find common sense solutions."
Learn more: Commissioner Lara's order to the FAIR Plan.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].