A class action lawsuit filed against the California FAIR Plan Association claims the plan—which provides basic coverage when other insurers aren’t available but charges a higher premium for it—sold policies lacking adequate coverage for fire and smoke damage.
Under the lawsuit, filed in Alameda County Superior Court on July 24, four California residents on behalf of 365,000 FAIR Plan policyholders are asking the association to increase its fire coverage for all customers to comply with state law.
Dylan L. Schaffer, attorney for the plaintiffs, told The Epoch Times that California law requires a minimum of coverage for losses caused by a fire with no exceptions, yet the FAIR Plan has refused to cover some damages to homes that weren’t burned, but instead were severely damaged by smoke.
“The way the statute reads, it describes that coverage as all loss by fire, pretty broad coverage, and it applies just as much to the FAIR Plan as it does to Farmers, or AAA, or Nationwide, or any other carrier,” Mr. Schaffer said.
The Department of Insurance requires homeowner’s wildfire policies to cover all “direct physical loss” from fires and smoke, he said, but since at least 2017 the FAIR Plan has covered only “permanent physical damage” under its wildfire policies.
But often the damage can’t be seen, according to Mr. Schaffer.
“A lot of it gets absorbed into building components and you have to test for it,” he said.
During the August Complex fire in 2020, a home near Santa Cruz that survived over a 30-day period while many surrounding homes were burnt to ash was refused coverage by the FAIR Plan despite hundreds of thousands of dollars in damage from smoke absorption.
The homeowner, a client of Mr. Schaffer, watched as her neighbors were all covered for the same smoke damage while she was refused. Unable to return home because of the toxins absorbed in her walls, she eventually sold her home, he said.
“She watched all of her neighbors get professional remediation and content replacement, and she got nothing,” he said.
A FAIR Plan spokesperson told The Epoch Times the association doesn’t comment on pending litigation.
Initially, the FAIR Plan was given the green light under then Insurance Commissioner Dave Jones, who said the plan could keep its “permanent physical damage” requirement, according to the lawsuit.
But in 2022, current Commissioner Ricardo Lara sent a letter to the plan that said losses by fire do not require “permanent physical changes” to qualify for coverage. The department and FAIR Plan have failed to take action since, Mr. Schaffer said, which is also referenced in the lawsuit.
He said Mr. Lara’s findings prove the FAIR Plan’s policy is illegal and that his class action is very likely to succeed.
“I think that Commissioner Lara gave me the ball on the one-yard line with four downs to go and a very, very good offensive line, and I’m pretty sure I’m going to get into the end zone,” he said.
The Department of Insurance did not return a request for comment on deadline.
Mr. Schaffer said precedent is on his side.
“No case in United States history has ever said that there’s a separate, standalone peril, called smoke or smoke damage, only their plan invented that,” he said.
The lawsuit doesn’t seek damages for any of the plaintiffs’ lost insurance benefits, just that FAIR Plan must expand its coverage.
