California's insurance commissioner is taking action against the FAIR Plan. Wildfire survivors say it's too late

San Francisco Chronicle​

10 hours ago

In 2017, the California FAIR Plan got permission to change the language in its policies pertaining to wildfire smoke damage, in part by promising regulators the changes wouldn't reduce payouts for its policyholders.
Eight years, hundreds of complaints and multiple lawsuits and investigations later, California Insurance Commissioner Ricardo Lara has filed a rare legal challenge against the insurer of last resort for allegedly breaking its promise — and allegedly violating multiple insurance regulations including the Fair Claims Settlement Practices Act.
The enforcement action, the first the department has taken against an insurer for conduct following the L.A. wildfires, calls on the FAIR Plan to 'cease and desist' any practices that violate Fair Claims Settlement Act regulations, and to discuss its policy language at a future hearing. Currently the FAIR Plan only covers what it calls 'permanent physical changes' wrought by smoke, language the insurer has interpreted as allowing it to deny a range of smoke damage claims.
If the FAIR Plan does not adequately address the department's concerns at the hearing, the California Department of Insurance could escalate further by filing an additional cease-and-desist order related to specific accusations laid out in the document. The department also announced a monetary penalty against the insurer to be determined based on how many legal violations the Department identifies at the hearing.
While the department would not specify exactly how many complaints policyholders have filed against the FAIR Plan for denying smoke damage claims, the department's press release said it has received 'hundreds' of related complaints against the insurer over multiple years.
In an emailed statement to the Chronicle, FAIR Plan spokesperson Hilary McLean said the plan intends to 'fully participate' in the legal process initiated by the department.
'We understand the heavy toll wildfires have on families and communities, which extends far beyond the loss of property, and we remain focused on helping our customers recover and rebuild,' McLean said in the statement.
The FAIR Plan has until mid-August to file a response. Insurance Department spokesperson Gabriel Sanchez said Lara would make a final decision after the hearing and evaluate evidence presented by both sides. Sanchez added that while the action involved complaints stemming from the LA wildfires, it 'addresses broader concerns, including patterns of conduct that predate' this January.
The FAIR Plan is managed by a governing committee of industry representatives and paid into by all admitted carriers in California.
Some policyholder advocates welcomed the department's action, though they pointed out that a separate, landmark court decision in June had already ruled that the relevant FAIR Plan policy language was illegal. Attorneys in that case expect to receive an injunction against the FAIR Plan in the next year, which would require it to change its policy language and re-adjust claims for thousands of policyholders going back to 2021 — regardless of what the CDI does or doesn't do.
'Certainly we've been asking the department to do this for quite some time,' Amy Bach, Executive Director of United Policyholders, told the Chronicle.
Now, she said, 'the most important thing here is we get people's homes properly remediated and restored, and the FAIR Plan and their member insurers not continue to ignore the most current science, which is identifying toxic conditions that need to be remedied. …We can't have people moving back into homes that are unsafe, and get sick and die.'
If an insurer denies their smoke damage testing or cleaning claim, families face a terrible choice: Either fight the insurer and deal with months of stress and uncertainty as their temporary housing coverage dwindles, or move home before they feel safe — and potentially expose themselves and their children to toxic smoke particles lingering in their walls and on their floors.
'Commissioner Lara's own press release shows that his FAIR Plan market conduct exam was completed in 2022. Yet he took no action until today, three years later,' Joy Chen, co-founder and CEO of the Eaton Fire Survivors Network, said in a statement provided to the Chronicle.
She continued: 'That delay caused real harm. Eaton and Palisades fire survivors suffered needlessly under FAIR Plan smoke damage denials because Lara failed to act on the findings of his own investigation.'
In response to Chen's statement, Sanchez noted that the Department had worked for years to 'build a strong evidentiary record to meet legal standards and ensure lasting accountability.'
In 2022, CDI released the findings of a multi-year investigation into the Fair Plan. That investigation, called a market conduct exam, identified 59 cases the FAIR Plan allegedly improperly denied or limited coverage for smoke damage it didn't consider having caused 'permanent physical change.' In a letter to the FAIR Plan, the department's general counsel wrote that such denials ran 'contrary to the law.' California requires all insurance companies offer fire coverage equal or better to that of the state's standard policy, which does not exclude smoke or 'nonpermanent damage.'
In January, shortly after the huge Los Angeles fires, the FAIR Plan told the Chronicle it had not changed its coverage as a result of the 2022 Market Conduct Exam. 'The FAIR Plan has not altered its policy form or the way it determines coverage for smoke damage claims as a result of the market conduct exam,' the spokesperson wrote.
The FAIR Plan, once seen as a last-ditch stand-in for a small number of Californians who couldn't get normal insurance, has seen explosive growth in the last several years as mainstream insurance companies increasingly drop policyholders and refuse to sign on new ones. It added 90,000 policyholders in the first half of 2025 alone, the Chronicle has found, boosting its number of insureds to nearly 600,000 — close to 7% of all policyholders in the state.
Over the past few years, the consequences of insurance denials of smoke testing and remediation have grown as wildfires have become more urban — and their smoke increasingly toxic. For instance, in July, the Chronicle reported that beryllium, a rare and exceedingly toxic metal, had been detected at potentially dangerous thresholds in dozens of homes in Altadena and Pacific Palisades.
Despite this changing paradigm and the dangers it poses to families, other major insurance companies have also repeatedly denied comprehensive testing and cleaning for some of the most common and dangerous pollutants found in smoke, including asbestos and lead.
The science around smoke damage — what to test for, how to test for it and what to do about it — is far from settled, experts told the Chronicle. No state has instituted consistent guidelines around how insurers should handle and cover this type of damage, though Colorado has begun the process.
To fill in the gaps, Lara in May announced his department was forming a Smoke Claims & Remediation task force. Members include experts from public health agencies, policyholder advocates and representatives from multiple companies that work primarily for and with insurance companies.