{"id":126224,"date":"2025-08-07T11:38:09","date_gmt":"2025-08-07T11:38:09","guid":{"rendered":"https:\/\/www.europesays.com\/us\/126224\/"},"modified":"2025-08-07T11:38:09","modified_gmt":"2025-08-07T11:38:09","slug":"insurer-of-last-resort-faces-questions-over-smoke-damage-claims","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/126224\/","title":{"rendered":"Insurer of last resort faces questions over smoke damage claims"},"content":{"rendered":"\n

Last week, the Department of Insurance ordered the state\u2019s home insurer of last resort<\/a> to answer allegations that it has handled smoke damage claims illegally, which has prompted policyholder complaints and multiple lawsuits.<\/p>\n

But consumer advocates say the legal action is long overdue, and some are skeptical that the move will reform the controversial California FAIR Plan.<\/p>\n

The July 31 filing threatens the plan, operated by the state\u2019s licensed home insurers, with a cease-and-desist order and fines of up to $10,000 for each violation. The plan will be able to defend itself at an as-yet unscheduled hearing before a department administrative law judge.<\/p>\n

\u201cI\u2019ve spoken with wildfire survivors who would rather lose their homes to flames than endure the stress and confusion of navigating smoke damage claims,\u201d said Insurance Commissioner Ricardo Lara in a statement. \u201cThis is unacceptable.\u201d<\/p>\n

Hilary McLean, a spokesperson for the plan, said in a statement that the insurer \u201cwelcomes the opportunity to engage in this process\u201d and has been working with the department over the past year to \u201cupdate and clarify its policy language around smoke damage.\u201d<\/p>\n

The FAIR Plan\u2019s handling of smoke damage claims<\/a> has angered homeowners who say that instead of being promptly offered industrial hygienic testing for toxic substances and professional cleaning services \u2014 even after homes were infiltrated by soot, ash and other fire debris \u2014 they were told to try to clean up their properties and given lowball offers to close their claims.<\/p>\n

However, advocates for policyholders have questioned why it took so long for the department to take the action after its own probe in 2022 found 418 violations of state law and the insurance code.<\/p>\n

\u201cThat 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,\u201d said Joy Chen, chief executive and co-founder of the Eaton Fire Survivors Network<\/a>, an advocacy group formed following the Jan. 7 fires.<\/p>\n

Gabriel Sanchez, the department\u2019s press secretary, said regulators worked methodically in bringing the case.<\/p>\n

\u201cTaking enforcement action is a legal process, not a political decision. We must build a strong evidentiary record to meet legal standards and ensure lasting accountability. That\u2019s exactly what we\u2019ve done,\u201d Sanchez said. <\/p>\n

Harvey Rosenfield, an attorney and founder of Los Angeles advocacy group Consumer Watchdog<\/a> and a critic of Lara who has accused him of being too chummy with the insurance industry, said the commissioner could have sought an injunction in civil court to halt the alleged illegal claims denials years ago.<\/p>\n

He cited the case of Mercury Insurance, which the department took administrative action against in 2004 over allegations it was having auto insurance customers pay illegal broker fees. Though Mercury ultimately paid a record $41 million penalty<\/a>, the case was tied up in courts for 15 years following multiple appeals by the insurer.<\/p>\n

\u201cThis process can become a shield for the insurer to use to protect themselves from accountability,\u201d Rosenfield said. \u201cIt raises the question of Lara\u2019s true intentions, though he could prove us all wrong.\u201d<\/p>\n

The order to show cause filed by the department accuses the FAIR Plan of denying smoke damage claims through its reliance on illegal policy language adopted in 2017 that requires the claims to show \u201cpermanent physical changes\u201d to property.<\/p>\n

A market conduct exam of a random sample of claims handled by the plan from Jan. 1, 2017 through March 16, 2021 found 418 violations<\/a> of state law and the insurance code, including 118 stemming from the changed language. <\/p>\n

The plan acknowledged some of the findings but disputed others, including that its policy language violated the law.<\/p>\n

The department threatened to take administrative action over the matter but did not do so until last week.<\/p>\n

Sanchez said the department has taken a number of escalating legal actions against the FAIR Plan, including holding a 2022 investigative hearing and issuing a May 2025 legal directive declaring the \u201cpermanent damage\u201d policy language unlawful and unenforceable.<\/p>\n

The claims denials by the FAIR Plan became an acute issue after the Jan. 7 fires due to their scale and the growth of the insurer\u2019s market share as commercial carriers left the market, citing California\u2019s increasing vulnerability to wildfires. <\/p>\n

The plan covered less than a quarter-million California homeowners in 2021, but its enrollment reached nearly 452,000 three months before the fires. <\/p>\n

The number of homes on the plan in the Palisades and Eaton fire zones rose nearly 50% last year to 28,440, according to a Times analysis<\/a>. The plan covered nearly 591,000 policyholders statewide as of June 25.<\/p>\n

The FAIR Plan has been sued multiple times over its smoke damage policy language.<\/p>\n

The department\u2019s action follows a landmark pre-trial ruling<\/a> in June by a Los Angeles Superior Court judge that found the language to be illegal in a 2021 case involving a former Mono County homeowner.<\/p>\n

However, since that ruling the plan has continued to reject smoke damage claims based on the 2017 policy language, contending the decision did not set a precedent, said Dylan Schaffer, an attorney who handled the case.<\/p>\n

Schaffer said he plans to seek a state injunction over the matter if he prevails at trial on the remaining legal issues, which could force the plan to reopen thousands of smoke damage claims filed since the lawsuit started.<\/p>\n

\u201cIt remains to be seen whether the department\u2019s action that should have been taken in 2022 will do anything to help consumers, including those impacted by the Los Angeles wildfires,\u201d Schaffer added.<\/p>\n

Amy Bach, an attorney and executive director of United Policyholders<\/a>, a San Francisco-based consumer advocacy group, said it is important that the department work with Schaffer and other attorneys who have already filed lawsuits against the plan.<\/p>\n

\u201c(They) are an incredibly important source of consumer protection that supplements governmental agencies,\u201d Bach said.<\/p>\n

The legal action taken by the department gives the FAIR Plan 15 days to file a formal response, after which a hearing is scheduled. The hearing allows both sides to present evidence, after which the judge will make a recommendation to Lara on how to treat the insurer.<\/p>\n","protected":false},"excerpt":{"rendered":"Last week, the Department of Insurance ordered the state\u2019s home insurer of last resort to answer allegations that…\n","protected":false},"author":3,"featured_media":126225,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5123],"tags":[11030,12854,1582,276,6517,77526,3040,19882,5025,316,35813,34873,2961,8511,77528,224,5337,18416,77527,77525],"class_list":{"0":"post-126224","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-los-angeles","8":"tag-action","9":"tag-attorney","10":"tag-ca","11":"tag-california","12":"tag-case","13":"tag-controversial-california-fair-plan","14":"tag-department","15":"tag-dylan-schaffer","16":"tag-fire","17":"tag-home","18":"tag-insurer","19":"tag-jan","20":"tag-la","21":"tag-lara","22":"tag-last-resort","23":"tag-los-angeles","24":"tag-losangeles","25":"tag-plan","26":"tag-policy-language","27":"tag-smoke-damage-claim"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114987290297195012","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/126224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=126224"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/126224\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/126225"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=126224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=126224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=126224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}