California has an insurer of last resort for fire coverage, the FAIR Plan, which I explained in detail in a previous post, What Is The California FAIR Plan? In late 2019 in the wake of hundreds of thousands of non-renewals, California Insurance Commissioner Ricardo Lara ordered the FAIR Plan to start selling more comprehensive policies that cover more perils than just fire. The order was set to take effect in 2020. However, in December 2019, the insurance industry filed a lawsuit to bar its enforcement.
In February 2020, a trial court granted the industry’s motion for preliminary injunction, barring the order to go into effect. A preliminary injunction is a temporary move, so it is not a final decision. It is designed to preserve the status quo and avoid imminent harm while the merits of a case work through the trial court system. The granting of a preliminary injunction, however, is typically seen as a strong indicator that a permanent injunction will issue later on.
Notably, the court granted the preliminary injunction the same day the California legislature introduced a new bill to force insurers to provide coverage in wildfire-prone areas as long as certain safety standards are met. Also moving through the legislature is a bill that would allow the FAIR Plan to adjust premiums in smaller areas than currently allowed if the percentage of homeowners in that area with FAIR Plan exceed a certain number. The goal of this is to prevent the FAIR Plan, an insurer of last resort, from becoming a major provider compared to standard insurance plans. We will continue to follow these developments and provide updates.