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Consumer Watchdog Sues California Insurance Commissioner Over Wildfire Loss Surcharges

The lawsuit challenges Commissioner Lara's approval of a plan allowing insurers to pass $500 million in wildfire-related costs onto homeowners.

FILE - An aerial view shows the devastation from the Palisades Fire on beachfront homes, Jan. 15, 2025 in Malibu, Calif. (AP Photo/Jae C. Hong, File)
Thousands of structures sit in ruins in Altadena, CA, on Sunday, Jan. 19, 2025. The Eaton Fire, fueled by intense Santa Ana Winds, ripped through beginning on the evening of Jan. 7. Fires across Los Angeles County have left at east 27 dead and over 180,000 people under evacuation orders. Over 12,000 structures, many of them homes and businesses, burned in the Palisades and Eaton Fires. (Photo by Jeff Gritchen, Orange County Register/SCNG)
An aerial photo shows the charred homes of Louise Hamlin, center left, and Chris Wilson, center right, after the Eaton Fire in Altadena, Calif., Thursday, Jan. 30, 2025. (AP Photo/Jae C. Hong)
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Overview

  • Consumer Watchdog filed a lawsuit against California Insurance Commissioner Ricardo Lara to block surcharges tied to the FAIR Plan's wildfire loss recovery mechanism.
  • The lawsuit alleges that the surcharges, approved by Lara, violate state law as they are not authorized under the 1968 statute that created the FAIR Plan.
  • The FAIR Plan has grown significantly, now covering nearly 560,000 policyholders, as traditional insurers retreat from wildfire-prone areas due to financial risks.
  • The surcharges would shift up to $500 million of a $1 billion FAIR Plan assessment onto California homeowners, sparking concerns about consumer protection.
  • State Farm and other insurers are also pursuing emergency rate hikes, citing financial strain from escalating wildfire damages and claims.