Judge in LA rules California FAIR Plan’s smoke-damage policy is illegal

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The ruling: Judge Stuart Rice said the California FAIR Plan violates the state’s insurance code because it offers less coverage than is required by state policy. That policy provides coverage for all "loss by fire" damage.

What the FAIR plan says: Since 2017, the Fair Access to Insurance Requirements Plan has required claimable fire damage to result in “direct physical loss” with “permanent physical changes” to a property. The plan also requires smoke damage to be visible, rather than proved by lab testing. Homeowners have long argued these policies shortchange them. Tuesday’s ruling struck down both.

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The response: The California FAIR Plan Association told LAist it is reviewing the decision but does not expect to appeal. "Since last year, we have been working collaboratively with the California Department of Insurance to update and clarify our policy language around smoke damage," a spokesperson for the association wrote in an emailed statement. "Our goal is to continue providing fair and reasonable coverage for wildfire-related losses while maintaining the financial integrity of the FAIR Plan for all policyholders." Some insurance experts say the ruling could raise rates for homeowners on the plan.

What’s next: The ruling could result in the FAIR plan’s policy changing. The commissioner of the California Department of Insurance is working to reform the FAIR plan, including investigating smoke damage claims handled by the plan after the Los Angeles fires. The state's insurance department also recently launched an investigation into smoke damage claims handled through State Farm.