California Fair Plan Explained

California (Un)Fair Plan – Good, Bad & Oh So Ugly

Are you a California Fair Plan customer? We are sorry. Really. You are now insured by the company that is proud to call itself the “insurer of last resort”. 

But all hope is not lost. Keep reading. There is good news.

Since 2015, Kerley Schaffer has pursued the California Fair Plan for its illegal policy and illegal claims practices. We have worked closely with other firms, the California Department of Insurance, and even the state attorney general, doing what we can to bring Fair Plan into the light. 

We got a big win in 2015, when Fair Plan tried to treat homeowners insurance like car insurance.

Starting in 2018, we found Fair Plan was cheating wildfire smoke damage victims. We filed lawsuits including a class action in Los Angeles. We also informed the Department of Insurance, which found that Fair Plan had committed fraud and was cheating wildfire victims around California.

Recently, we filed a class action on behalf of all Fair Plan customers because as the state department of insurance has found, its policy fails to provide mandatory coverage for fires. LA Times article on Fair Plan

We also sued Fair Plan for failing to follow the law regarding disclosing information to its customers during claims. [I need to do a blog post on this, but for the time being, no link]

We are on the job. If you are a Fair Plan customer, check back here for the latest. If you have a Fair Plan claim-related question, give us a call. 

Meanwhile, here are a few things you should know about Fair Plan:

Rule 1: Fair Plan may seem like an insurance company, but it’s not. 

In the sixties, a bunch of super-profitable companies started to pull out of property insurance markets in California—high fire risk areas, for example—because they were making slightly less money. But the state said, “Look, if you want to do business here, you better help get insurance to everyone who needs it.” 

Fair Plan is what you might call a risk pool. It’s a giant pile of money—insurers like AAA, Farmers, State Farm, and Nationwide contribute according to their market share—which is meant to protect people who those insurers cancel or won’t otherwise insure. Lately, Fair Plan’s market share is growing because the other carriers are pulling out of any areas they view as high risk so they can maximize their profits. 

Rule 2: All insurers cheat. Don’t take it personally. Fight back.

Insurers take premiums, invest those premiums, and make piles of money. When it comes time to pay claims, they mostly cheat everyone, and figure if they get sued a few times they still come out on top. Just look at their nice offices around the country, and the expensive ads they run during the Superbowl, and you can see carriers are fantastically profitable. Cheating customers is good business.

So, while Fair Plan is not strictly speaking an insurance company, it does sell property insurance. And as the company is run by a committee of highly paid executives from giant insurers, it won’t surprise you that they deny claims unfairly, lowball their estimates, and generally throw up hurdles when policyholders make claims to help their bottom lines.

But the good news: the same rules and regulations that apply to Nationwide and State Farm also apply to Fair Plan. If your claim is mishandled, get informed, fight back, find a good public adjuster, and if necessary, call a lawyer.

Rule 3: Never underestimate the creative ways an insurer might find to cheat.

Give California Fair Plan credit—it has been an innovator in finding ways to save money on the backs of its customers. The company routinely breaks the law. It won’t pay to clean houses damaged by fire debris from wildfires. It won’t even pay to inspect for smoke damage from wildfires because it figures homeowners can just mop up the soot and ash. It employs an army of unqualified adjusters whose job appears to be not to help insureds but to find ways to avoid paying claims. And when anyone complains, it hires its go-to lawyers to play offense against its own customers. 

Fair Plan is rarely fair. But good, bad, or ugly, Fair Plan is the future for many Californians. If you have a claim, know your rights, fight back, put everything in writing, and get the help you need.