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FAIR Plan Surge: Insurers Eye Consumers for Fire-Related Costs; Legal Challenge Afoot
Insurance firms aim to impose higher premiums on homeowners residing in California, due to the expenses incurred from the wildfires in Los Angeles County.
In the aftermath of the devastating LA County fires, insurers are eyeing homeowners across California as potential paymasters for some of the costs they incurred.
California's FAIR Plan, the state's insurer of last resort, sought and received approval on February 11 to impose a $1 billion assessment on its member carriers to help cover its losses from the fires in Pacific Palisades, Altadena, and Sylmar. The plan, which operates through the state's licensed home insurers, has made $2.75 billion in claims payments and anticipates total costs for the fires to be around $4 billion - a figure it cannot cover with its limited surplus and reinsurance funds[4].
To recoup a portion of these costs, insurers have started filing applications with the California Department of Insurance, seeking authorization to surcharge their policyholders statewide for half the costs of the FAIR Plan assessment, according to a policy implemented last year[1][2][5]. These surcharges could amount to hundreds of millions of dollars, potentially burdening homeowners with additional expenses on top of the increased premiums they've already faced[3].
So far, at least 10 home insurers and their affiliates have filed applications for surcharges, with expected annual fees ranging from $6 or less for some rental policyholders, $20 or $30 for condo owners, and around $40 to $60 for standard homeowners policies[2]. The insurers aim to apply these charges from this year, often spreading them over two annual billing cycles[2].
Among the insurers involved are affiliates of AAA and Mercury, two of the largest home insurers in the state, as well as smaller market players like Amica and Western Mutual[2]. The final decision on the surcharges rests with Insurance Commissioner Ricardo Lara[2].
"This modest, temporary cost recovery - just a few dollars a month for most policyholders - is critical to preventing a catastrophic collapse of California's insurance market," stated Denni Ritter, vice president for state government relations for the American Property Casualty Insurance Assn[2].
However, a legal challenge has been launched against Commissioner Lara's policy, with Consumer Watchdog, a Los Angeles-based consumer advocacy group, filing a lawsuit on April 14, 2025, alleging that the policy violates state law[1][3]. If successful, the lawsuit could block the implementation of these surcharges and require insurers to refund any unlawfully collected fees[1][3].
Meanwhile, many of the state's licensed home insurers have yet to file applications, but future surcharges are expected to be in a similar range, as the FAIR Plan assessed its member carriers based on their share of California's home insurance market[4].
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As insurers withdrew from the LA market, homeowners flocked to the FAIR Plan, leading to a sharp increase in its rates. Now, fire victims are battling with the FAIR Plan to receive compensation for their losses[4].
In late February 2025, a Times analysis found that in the Palisades and Eaton fire zones, the FAIR Plan's rolls had increased dramatically - rising by a combined 47% last year. By 2024, the number of homes in both areas on the plan nearly doubled from 14,272 to 28,440[4].
A bill working its way through the Legislature would authorize the California Infrastructure and Economic Development Bank to issue bonds on behalf of the FAIR Plan to help pay claims and increase its liquidity[3].
Consumer Group Sues Insurance Commissioner Over Fair Plan Assessments on State Homeowners
In May 2025, Consumer Watchdog sued California Insurance Commissioner Ricardo Lara, alleging that his policy, which allows insurers to recoup up to half of any FAIR Plan assessment, violates state law[1]. If the court rules in favor of Consumer Watchdog, this policy could be barred, potentially halting the surcharges and requiring insurers to return any unlawfully collected fees[1].
[Enrichment Data: The lawsuit between Consumer Watchdog and California Insurance Commissioner Ricardo Lara is ongoing as of May 2025, with the central issue being whether Commissioner Lara's policy allowing insurers to surcharge policyholders for costs related to the LA fires violates California law. The lawsuit, filed in Los Angeles Superior Court, alleges that the policy was implemented without proper legal procedures, including public notice and legislative approval, and shifts costs from insurers to policyholders, benefiting insurance companies while burdening consumers.]
- The FAIR Plan, California's insurer of last resort, has positioned itself as a source of last-resort funds for insurers, seeking and receiving approval to impose a $1 billion assessment on its member carriers to cover losses from wildfires in Los Angeles County.
- Amidst the financial burden of covering the costs of the FAIR Plan assessment, insurers have initiated the process of applying for surcharges on their policyholders statewide to recoup a portion of these costs, potentially affecting homeowners with additional expenses on their premiums.
- A legal challenge has been launched by Consumer Watchdog, a Los Angeles-based consumer advocacy group, against California Insurance Commissioner Ricardo Lara's policy, arguing that it violates state law and could block the implementation of these surcharges, potentially requiring insurers to refund any unlawfully collected fees.
- To maintain the stability of California's insurance market, the California Infrastructure and Economic Development Bank is considering authorizing the issuance of bonds on behalf of the FAIR Plan to help pay claims and increase its liquidity, as a bill works its way through the Legislature.
