Thousands of victims of the Los Angeles fires who have submitted claims to the California FAIR Plan Association could face difficulties trying to recover what they have lost, NBC News reported.
The FAIR Plan is an insurance pool created by state officials in 1968 that offers coverage to residents and business owners in wildfire-prone and other vulnerable areas who cannot obtain coverage from private insurers.
The plan covers losses caused only by fire or lightning, internal explosion, and smoke, and it caps residential policies at $3 million.
In recent years, information about flaws in the FAIR Plan's operation emerged. An Insurance Department examination found, for example, that between 2017 and 2021, the FAIR Plan's claims-handling practices repeatedly violated the state's insurance code and code of regulations.
The California Department of Insurance has also battled with the FAIR Plan over following state rules. For example, several years ago the office of Ricardo Lara, California's insurance commissioner, alleged that the FAIR Plan allegedly had illegally limited coverage for some claims for smoke damage.
"The state of California needs to intervene and make FAIR Plan do what they're supposed to do, which is honor their contractual obligation to make people whole who have paid them premiums year after year," Bruce Silverstein, a Malibu resident and city council member, told NBC News. "The insurance commissioner needs to get tough with them, and the attorney general needs to bring legal action against them to force them to honor their obligations."
Dylan Schaffer, a lawyer who has successfully sued the FAIR Plan on behalf of policyholders, told NBC News, "The fact that FAIR Plan has not made any assessments in 30 years during substantial wildfire events suggests this business does not have the profitability problems the insurers say it does.
"But now that we have a multibillion liability for the FAIR Plan, the insurance industry is going to pass it along to the consumer? That's 180-degrees contrary to its legislative purpose."