SAN DIEGO, Calif. — Homeowners and renters in San Diego may soon get a bill in the mail from their insurance companies to cover some of the cost of the LA wildfires to the California FAIR Plan.
“Unilaterally imposing hundreds of millions, if not billions of dollars in surcharges on policyholders who are not even part of the FAIR plan is simply unfair,” said Ryan Mellino, an attorney with Consumer Watchdog.
The nonprofit is suing California Insurance Commissioner Ricardo Lara to stop the plan from moving forward.
Insurance companies, which run the FAIR Plan, are expected to pass on $500 million dollars in costs for the LA wildfires to their policyholders.
In February, Lara ordered insurers to give $1 billion to the FAIR plan to pay for claims from the fires.
Consumer Watchdog alleges in its lawsuit that the surcharge violates state law.
Mellino said consumers have never had to foot the bill of a special surcharge before. He expects policyholders to start getting bills in August.
“The way it’s always worked is that insurance companies are responsible for covering the expenses and writings of the FAIR plan and in return when the FAIR plan makes a profit that is distributed back to those member companies.”
Escondido resident Atwood Lynn is on the FAIR Plan, which is considered the insurance of last resort that only provides fire coverage.
“It’s pretty gosh darn expensive,” he said.
Lynn said he was paying $900 a year for private insurance but his provider dropped him a couple of years ago.
He tried to find another carrier, but no company would write a policy to cover his home. “I went from 900 dollars to $3600 dollars on an annual basis.”
Lynn is concerned his annual cost could go up even more given the FAIR Plan’s financial woes.
The California Department of Insurance said the lawsuit from Consumer Watchdog is a public relations stunt that fails to benefit consumers.
"This negatively impacts homeowners, small businesses, and nonprofits that require access to genuine insurance options, while failing to address the ongoing insurance crisis. Additionally, it undermines our efforts to enhance competitiveness across the market, which would allow people to transition from the costly and limited FAIR Plan back to the standard insurance market,” department spokesman Gabriel Sanchez said.
