California Group Sues to Block Insurers Adding Surcharges After LA Fires

The state insurance chief allowed companies to impose surcharges totalling $500 million.

Destruction caused by the Palisades Fire near Los Angeles on Jan. 9, 2025. John Fredricks/The Epoch Times

A consumer group has filed a lawsuit to block California insurers from passing $500 million in surcharges on to policyholders to help cover outlays resulting from the devastating Los Angeles County fires in January.

The April 14 lawsuit, filed in Los Angeles Superior Court by Consumer Watchdog, seeks to halt the state Insurance Commissioner’s approval of the surcharges, which companies hope to  impose to recoup the money they had to provide California FAIR Plan, the state’s insurer of last resort.

California’s FAIR Plan (Fair Access to Insurance Requirements) provides basic coverage for homeowners unable to find fire insurance in the private marketplace. A private association created by state law, FAIR Plan requires all insurers licensed to operate in California to financially support its fire insurance pool.

Insurance Commissioner Ricardo Lara in February approved the FAIR Plan’s request for $1 billion from member companies for the Los Angeles County fires claims. According to Insurance Department regulations passed last year, insurers could recoup half the FAIR Plan assessment by passing the cost through to their policyholders, in this case, $500 million, upon approval of the commissioner.

The lawsuit alleges that the 2024 regulations violate FAIR Plan statutes, “which contain no authorization for pass-throughs,” said Consumer Watchdog in an April 15 statement. The suit also says the decisions were made without any public input or participation, violating the Administrative Procedure Act.

The Epoch Times has contacted Lara’s office.

Consumer Watchdog hopes to spare policyholders now and in the future.

“Homeowners across California are currently on the hook to pay up to $500 million worth of the $1 billion FAIR Plan assessment approved ... after the Palisades and Eaton Canyon wildfires,” the group wrote in its statement.  “There is no upward limit on the amounts that can be passed through to homeowners in the future, and the next wildfires could see homeowners responsible for billions more in assessment costs.”

Ryan Mellino, the group’s staff attorney, added: “We recognize that the FAIR Plan has dramatically grown in recent years and agree with the commissioner that something must be done to address the situation, but the answer is not a unilateral bailout of hundreds of millions.”

The American Property Casualty Insurance Association (APCIA), which is made up of more than 1,200 individual insurance companies nationwide, called the lawsuit “a reckless and self-serving stunt.”

The lawsuit “threatens to make California’s insurance crisis even worse and harm the consumers,” a statement from APCIA said.

“Insurers have already paid tens of billions in claims and contributed more than $500 million to support the FAIR Plan’s solvency,” APCIA said, “even though they do not collect premiums from FAIR Plan policyholders.”