Consumer Watchdog Challenges California Insurance Surcharges

The California Department of Insurance is currently facing a lawsuit from Consumer Watchdog, which aims to prevent the imposition of surcharges on California homeowners' insurance policies. These surcharges could potentially amount to hundreds of millions of dollars, stemming from the decision by Commissioner Ricardo Lara to allow the California FAIR Plan to pass-through catastrophic assessment costs to policyholders. The FAIR Plan, which serves as the state's insurer of last resort, was forced to assess its member companies for funds following the devastating Palisades and Eaton Canyon wildfires. The decision has been criticized for lacking public participation, violating procedural rules, and unfairly burdening homeowners with the FAIR Plan’s losses while insurers retain the profits.

Consumer Watchdog has filed a Petition for a Writ of Mandate in Los Angeles Superior Court, seeking to halt these surcharges. The organization argues that the decision violates the FAIR Plan statutes, which do not authorize such pass-throughs and require that losses and profits be shared equally among the insurance companies. Moreover, the lawsuit emphasizes that allowing these surcharges does not address the underlying expansion of the FAIR Plan but encourages insurers to continue their non-renewal policies, potentially exacerbating the burden on homeowners. The outcome of this legal battle could significantly impact the financial responsibilities of California homeowners and the operational dynamics of the state’s insurance market.