Lawmakers in the state contemplating updates to regulations following the Los Angeles wildfires.
Title: Stave Off the Calamity: AB 226 Aims to Secure the State's FAIR Plan
SACRAMENTO - Six months post the destructive Los Angeles wildfires, California lawmakers are devising legislation to fortify the state's Financial Assurance for Residential Insurers (FAIR) Plan, a crucial lifeline for high-risk properties.
Assemblymembers Lisa Calderon (D-Whittier) and David A. Alvarez (D-San Diego) took a stab at this bill last year with AB 226, which aims to grant the FAIR Plan the opportunity for state-backed loans and bonds from California's Infrastructure and Economic Development Bank. This safeguard would prevent the FAIR Plan from running dry, especially during tragedies like the recent wildfires.
Regrettably, Alvarez's proposal didn't make it in 2024, falling short despite receiving unanimous support in the Assembly and never reaching the Senate floor for debate. If successful, the FAIR Plan could have withstood the deluge of claims filed post-wildfires – a comfort Alvarez believes would've saved residential properties from subsequent soaring insurance premiums.**
"If they had this option, they wouldn’t be squeezing consumers with price hikes on the private market now," Alvarez lamented.**
Spurred by the devastating fires, AB 226 is one of many bills under legislative scrutiny, all aimed at protecting homeowners, streamlining claim processes, and offering financial safeguards for survivors.**
After the Palisades and Eaton fires claimed over two dozen lives, Governor Gavin Newsom and legislative leaders pledged $2.5 billion in wildfire aid. Their swift, bipartisan approach demonstrated the need for expedience and unified action to aid affected communities.
"Thousands of our families and friends are going through hell. We need to act swiftly, put aside our disagreements, and focus on providing the financial support, boots on the ground, and policy relief needed to rebuild shattered neighborhoods," Senate President Pro Tem Mike McGuire (D-Healdsburg) stated after the bill's approval.**
California's FAIR Plan, initially conceived as a last-resort insurer for high-risk, uninsurable properties, has been in the limelight due to accusations of collusion between private insurers and the FAIR Plan, as well as concerns about delays in claims settlements and smoke damage investigations.**
These issues have led lawmakers and industry advocates to press for robust safety nets, like the one proposed in AB 226, to ensure the FAIR Plan's solvency during emergencies and long-term viability as a solution to California's home insurance dilemma.**
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After insurers withdrew from the L.A. market, more homeowners increasingly depended on the FAIR Plan. The tragic January 7th fires have now left these victims scuffling with the state's last-resort insurer to receive their compensation.**
**Aside from AB 226, governing bodies are working through numerous wildfire-related proposals, including:
- AB 493, which mandates lenders to pay policyholders interest on disaster insurance payouts held in escrow.
- AB 597, which aims to limit public insurance adjusters from overcharging homeowners, particularly after a disaster or state of emergency.
- SB 495, which forbids insurers from demanding an itemized list of personal property losses from policyholders during a state of emergency and requires extensions if reconstruction is delayed.**
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Two pivotal lawsuits are currently underway, accusing California home insurers of forcing policyholders onto the FAIR Plan – a move that reportedly results in lower coverage and higher premiums. These suits allege a damaging level of collusion between insurers.
Sources:
[1] California Legislative Information, Assembly Bill 226, accessed on April 13, 2025. https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202520240AB226
[2] Los Angeles Times, California homeowners hit with surcharges amid insurance crisis, accessed on April 13, 2025. https://www.latimes.com/california/story/2025-03-03/california-homeowners-hit-with-surcharges-amid-insurance-crisis
[3] Insurance Journal, California Legislature Considers Measures Addressing Insurance Crisis, asked on April 13, 2025. https://www.insurancejournal.com/news/west/2025/04/12/594944.htm
[4] Farmers Insurance, Wildfire Insurance and Recovery Information, accessed on April 13, 2025. https://www.farmers.com/about-us/corporate-responsibility/community-support/wildfire-response
[5] Sacramento Bee, California lawmakers taking steps to bolster home insurance market, accessed on April 13, 2025. https://www.sacbee.com/news/california/fires/article263091198.html
- The FAIR Plan, a crucial lifeline for high-risk properties in California, could have withstood the onslaught of claims post-wildfires if Assembly Bill 226 had been successful.
- Despite receiving unanimous support in the Assembly, Alvarez's proposal for state-backed loans and bonds for the FAIR Plan didn't make it through in 2024 and never reached the Senate floor for debate.
- Spurred by the devastating wildfires, AB 226 is one of several bills under legislative scrutiny to protect homeowners and offer financial safeguards for survivors.
- Many homeowners in Los Angeles, left with no other option but the state's last-resort insurer, the FAIR Plan, are currently struggling to receive their compensation after insurers withdrew from the market.
- Two ongoing lawsuits accuse California home insurers of colluding to force policyholders onto the FAIR Plan, leading to lower coverage and higher premiums.
- Some wildfire-related proposals under consideration by governing bodies include AB 493, which mandates lenders to pay policyholders interest on disaster insurance payouts held in escrow, and SB 495, which forbids insurers from demanding an itemized list of personal property losses from policyholders during a state of emergency.
