California homeowners will soon see surcharges on their insurance bills as insurers seek to recover costs from the devastating wildfires in Los Angeles County earlier this year. State Farm and other major insurers have received approval to charge customers to cover portions of a $1 billion assessment levied by the California FAIR Plan Association, the state’s insurer of last resort.
The average surcharge for a standard homeowner’s policy is expected to be around $50, with the exact amount varying based on the size of the premium. These charges will be split into monthly payments over two years, starting December 1. The FAIR Plan, overwhelmed by claims from the January fires, assessed its member carriers, who are now passing some of these costs onto policyholders.
According to the Los Angeles Times, State Farm, which faced the largest assessment, is seeking to recoup $81.5 million from policyholders. Other insurers like Mercury and Farmers Insurance are also implementing surcharges.
Consumer Watchdog, a Los Angeles-based advocacy group, has filed a lawsuit against Insurance Commissioner Ricardo Lara, arguing that these surcharges are an illegal bailout of the insurance industry. The group claims that the surcharges violate the FAIR Plan statutes, which require insurers to share costs equally rather than shifting them to consumers.
The California Department of Insurance is also taking action against the FAIR Plan for allegedly denying and limiting smoke damage claims from wildfire survivors. Commissioner Lara announced legal action to ensure fair treatment of policyholders and compliance with state laws.
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