LOS ANGELES COUNTY – A judge Thursday denied a request by the California FAIR Plan Association for a preliminary injunction staying enforcement of Insurance Commissioner Ricardo Lara‘s September order that the FAIR Plan offer a homeowners policy with coverage for water damage, theft and loss of use in addition to fire damage.
Los Angeles Superior Court Judge Mary H. Strobel said in a written ruling that in weighing the harms from either issuing or denying the preliminary injunction, she did not find that the balance of those harms tips strongly in favor of the FAIR Plan’s arguments.
In the complaint filed Oct. 14, the Fair Plan said Lara’s Sept. 24 order is “contrary to the express goals underlying the FAIR Plan Act to assure stability in the property insurance market for property located in the state of California.” The FAIR Plan attorneys maintained in their court papers that their client would suffer significant harms if injunction was not issued, including the need to hire and train staff and develop infrastructure and expertise to handle underwriting and rating of applicants.
Lara’s office rebutted those claims in a previously released statement.
“The insurance industry running the FAIR Plan is once again putting its profits ahead of the needs of California consumers,” the statement read. “Forcing its policy holders to purchase separate insurance policies for liability and contents, often from the very same insurance companies who dropped their coverage in the first place, only drives up the price for consumers.”
The FAIR Plan’s purpose is to take all comers and Lara believes it is “falling short of its purpose and mission to be there for consumers when they need it most,” according to the statement, which further said that Lara will “not let up until Californians have the coverage options they need.”
The FAIR Plan is a joint association formed by insurers licensed to write basic property insurance. Lara’s directive will give about 200,000 Californians who currently rely on the FAIR Plan to protect their homes a more comprehensive option besides the bare-bones coverage that the FAIR Plan currently offers, according to Lara’s office. In addition, requiring the FAIR Plan to offer a more comprehensive homeowners’ policy “will save consumers from having to purchase a second companion policy to cover other hazards such as premises liability, water damage and theft,” according to Lara’s office.
But the plaintiff’s attorneys argued in their court papers that requiring the FAIR Plan to offer the type of homeowners’ policy specified will “severely impact and destabilize the normal insurance market for comprehensive homeowners’ (basic) policies.”
The FAIR Plan will not act as the market of last resort, but instead as a competitor that offers a homeowners’ policy with less coverage than would be available from the voluntary market, the suit alleges. The order also is “irrational’ because it is geographically unlimited in that policies will be available for sale in areas unaffected by wildfires and in which there is no need for a FAIR Plan alternative, the suit states.
Last July, Strobel granted relief to the FAIR Plan in a separate action by finding that the insurance commissioner could not require the Fair Plan to offer a basic homeowners insurance policy.
But the judge also concluded that Lara had authority to require the FAIR Plan to offer some form of liability coverage if there was “some relationship, nexus or connection between the property and the liability coverage.”
That part of her ruling prompted an appeal by the FAIR Plan that is still pending.