A new class action lawsuit accuses the California FAIR Plan Assn. of illegally selling home insurance policies that offer subpar coverage for damages related to smoke and fire.
The lawsuit was filed last week in Alameda County Superior Court on behalf of four California residents. The class action lawsuit will represent over 365,000 FAIR Plan policyholders.
The FAIR Plan is a last resort, state-offered backup insurance policy for homeowners who are unable to secure insurance coverage from a private company. This coverage is widely used among individuals who live in an area where there is a heightened risk of fire or smoke damage. This state plan is funded by a number of private investors who also write policies regarding coverage through the state.
As wildfires have increased across California in recent years, it has become incredibly costly to secure insurance. As a result, the FAIR Plan has seen a spike in new policyholders because of the flurry of insurance companies who have left the state due to heightened liability concerns. According to reports, as the FAIR Plan issues new policies, they have become exposed to over $304 billion in liabilities.
The lawsuit explains that due to a policy change in 2017, coverage under the FAIR Plan’s standard policy was revised, significantly limiting coverage for policyholders. The FAIR Plan’s revised policies limit coverage if damage is caused by smoke or debris, and cover damage only if it’s directly caused by a fire.
The lawsuit was filed by Oakland attorney Dylan Shaffer of Kerley Schaffer LLP. The law firm says that according to the state code, standard policies should “provide coverage for ‘all loss by fire’ to an insured property, without limitation or restriction on the scope of the covered losses.” The current policies offered by the FAIR Plan do not align with the law.
The Lawsuit points to a California Department of Insurance investigation that looked into the FAIR Plan’s coverage policies. Since the policy change in 2017, it is reported that over 3,000 claims related to smoke and fire were denied.
Shaffer explains that the insurance provider makes “money by cheating customers, by providing inadequate coverage, and by charging high rates.”
The law is seeking to have the FAIR Plan comply with state codes and take corrective actions.
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