Takeaways:
- FAIR Plan must justify denial of smoke claims
- Consumer Watchdog brings another suit against the regulator
- Wildfire catastrophe models are approved
Fallout from California's January wildfires, and ongoing disputes between the state's insurance regulator and a consumer advocacy group continued this week. The state's insurer of last resort, the California FAIR Plan Association, now faces both a court case and regulatory action.
Insurance commissioner orders FAIR Plan to justify smoke claim denials
California insurance commissioner Ricardo Lara issued an enforcement order against the FAIR Plan, requiring it to show cause for denying smoke damage claims resulting from the Palisades and Eaton wildfires, as well as other past wildfires in the state.
"I've spoken with wildfire survivors who would rather lose their homes to flames than endure the stress and confusion of navigating smoke damage claims. This is unacceptable," Lara said in a statement. "We will not tolerate insurance companies breaking the law and denying Californians the coverage they deserve, including the FAIR Plan."
The commissioner's order states that the FAIR Plan violated California Insurance Code section 790.03 by misrepresenting policy terms, failing to investigate claims fairly, and denying legitimate claims without reasonable basis. The commissioner also stated that he plans to file for an ongoing financial examination of the FAIR Plan and evaluation of compliance with recommendations made by the Department of Insurance (CDI) in a 2022 assessment.
In recent weeks, Lara announced a probe of
Los Angeles Superior Court ruled on July 22 that a
Consumer groups sue insurance commissioner for denying advocacy compensation
Consumer Watchdog, along with the Consumer Federation of California Education Foundation, has sued Commissioner Lara for denying the groups compensation for their work opposing homeowners insurance rate increases.
The suit challenges rejection of compensation requests for the group's legal work criticizing the commissioner's 2024 proposals regarding insurance rate transparency and use of home insurance price software models. The suit asks that the requests are granted, that compensation decisions are returned to administrative law judges and that the commissioner be recused from compensation decisions.
Regulator finishes review of wildfire models
The California Department of Insurance (CDI) has finished a review of a wildfire catastrophe model from Karen Clark & Company (KCC). The regulator also recently approved a
The approvals allow insurers to use these models to determine rates in the state. Under the regulator's Pre-Application Required Information Determination Procedure (PRID), scientists and experts who contributed to KCC US Wildfire Reference Model Version 3.0 were interviewed about its components, and the regulator analyzed detailed test cases.
"To accurately model wildfires and capture the effects of high winds, vegetation, moisture, topography and other factors influencing wildfire spread, KCC scientists developed an innovative physical modeling approach that leverages high-resolution data and advanced scientific methodologies," said Dr. Dan Ward, KCC Senior Director of Model Development, in a press release. "The KCC methodology explicitly incorporates the impacts of climate change and accounts for mitigation efforts at the property and community level to encourage the reduction of wildfire risk."
CDI also used PRID for the Verisk review.
