The California FAIR Plan, the state’s insurer of last resort, continues to deny smoke damage claims from the January wildfires, despite a court ruling and regulatory action against it. The plan has rejected claims for smoke-damaged homes, even when toxic substances were found, according to a review by the Los Angeles Times. The insurer initially required policyholders to show “permanent physical changes” to their property, a standard deemed illegal by a Los Angeles County Superior Court judge in June. However, the plan has since revised its language, now requiring “distinct, demonstrable and physical alteration” to property, citing a 2024 state Supreme Court case.
Despite these changes, the FAIR Plan’s denials have sparked criticism. Attorney Dylan Schaffer, who represented a plaintiff in the June case, argues that the denials are unfair, especially given the toxic nature of smoke damage. Governor Gavin Newsom has urged the FAIR Plan to process claims fairly and quickly, as the state has received numerous complaints from policyholders.
The California Department of Insurance has taken action against the FAIR Plan, filing an Order to Show Cause for systematically denying smoke damage claims. The department accuses the plan of misrepresenting policy terms and failing to conduct fair investigations. The FAIR Plan faces potential penalties and corrective measures if found in violation.
The January fires, which were among the worst in decades, have led to significant financial losses for the FAIR Plan. The plan estimates losses of $4 billion and has assessed its member insurers $1 billion to cover claims. As traditional insurers withdraw from the state’s fire-prone areas, more homeowners are turning to the FAIR Plan, increasing pressure on the insurer to handle claims effectively.
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