Kerley Schaffer interview with the Los Angeles Times: “California FAIR Plan Sued Over ‘Subpar’ Fire Coverage: Lawsuit Alleges Illegal Policy Limits”
The California FAIR Plan Association, already under scrutiny, is now facing a class-action lawsuit brought by Kerley Schaffer alleging that it's selling policies with inadequate fire and smoke damage coverage.
The lawsuit from Kerley Schaffer, on behalf of hundreds of thousands of FAIR Plan policyholders, claims the FAIR Plan's policies illegally limit coverage, putting homeowners at risk and failing to meet state requirements.
Key Allegations:
Subpar Coverage: The lawsuit alleges the FAIR Plan's policies provide "subpar" coverage for fire and smoke damage, failing to adequately protect homeowners.
Illegal Policy Limits: Since 2017, the FAIR Plan has allegedly limited coverage by only paying for smoke damage detectable to the naked eye or nose, rather than requiring laboratory testing.
Failure to Meet State Requirements: The lawsuit claims the FAIR Plan's policies fail to provide the "mandatory minimum coverage" required by California law.
Misrepresentations: The lawsuit alleges the FAIR Plan obtained approval for its policy based on "misrepresentations" and "concealment of material facts."
The FAIR Plan Under Pressure:
The FAIR Plan, the state's insurer of last resort, has seen a surge in new policyholders in recent years as private insurers leave the state or stop renewing policies due to extreme wildfires. As of March, the FAIR Plan was exposed to $340 billion in liabilities.
The "Naked Eye" Standard:
The lawsuit highlights a key point of contention: the FAIR Plan's standard for smoke damage. The lawsuit claims that since 2017, the FAIR Plan has limited coverage to smoke damage detectable to the unaided eye or nose of an average person, rather than requiring laboratory testing. This, according to the plaintiffs, puts residents at risk to contaminants that may not be visible.
Department of Insurance Involvement:
The lawsuit also targets the California Department of Insurance, alleging it failed to enforce its own policies. The lawsuit claims the department sent a letter to the FAIR Plan in January 2021 stating the amended fire insurance policy was unlawful and based on "misrepresentations." The letter directed the FAIR Plan to reform its policies and review rejected claims. A May 2022 report allegedly confirmed these findings.
What the Lawsuit Seeks:
The lawsuit asks the court to order the FAIR Plan to comply with the law and increase the scope of wildfire coverage in all of its California policies. The plaintiffs are not seeking monetary damages, but rather a change in the FAIR Plan's practices.
What This Means for Homeowners:
Kerley Schaffer’s lawsuit on behalf of FAIR Plan policyholders has significant implications for California homeowners insured by the FAIR Plan. If successful, it could lead to:
Expanded coverage for fire and smoke damage.
Re-evaluation of previously denied claims.
Greater accountability for the FAIR Plan and the Department of Insurance.
What You Can Do:
Review Your Policy: Carefully examine your FAIR Plan policy to understand your coverage for fire and smoke damage.
Document Everything: If you experience fire or smoke damage, document all visible damage, take photos, and keep records of all communication with the FAIR Plan.
Consider Legal Advice: If you believe your FAIR Plan claim has been unfairly denied or underpaid, consult with an attorney specializing in insurance claims. Kerley Schaffer has been litigating these issues against the FAIR Plan for more than a decade. We are ready to help. Go here for next steps.
Stay Informed: Follow the progress of the lawsuit and any related developments.
Conclusion:
The lawsuit against the California FAIR Plan underscores the challenges homeowners face in securing adequate insurance coverage in wildfire-prone areas. The outcome of this legal battle could significantly impact the rights and protections of FAIR Plan policyholders.
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