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Mountain Residents Have to Rely on Cali’s FAIR Plan

— August 10, 2021

Some California residents are receiving notices from insurers that they’ve been dropped from their plans.

Because they are at high risk of experiencing wildfires, insurance companies are allegedly eliminating coverage for homeowners in mountain communities, leaving with with the state’s FAIR Plan as the only option.  These homeowners are simply receiving letters in the email explaining that they’ll be dropped from coverage, forcing them to advocate for themselves if they want to introduce changes.

Mary Meyer, an 85-year-old widow was one of many mountain residents to receive a letter informing her she’d be losing coverage.  Meyer shared, “They simply said, this is a high-risk fire area, and we are not renewing your homeowner’s policy.”  The short explanation has sent her on the long and difficult battle, trying to find alternative, affordable coverage.

Mary Meyer’s insurance company, American Modern Insurance, left Meyer with only one option – the California FAIR Plan, which provides basic fire coverage when private companies will not.  The FAIR plan was established by statute (California Insurance Code sections 10091 et seq.) in August 1968 and issues policies on behalf of its member companies.

Mountain Residents Have to Rely on Cali's FAIR Plan
Photo by Guduru Ajay bhargav from Pexels

To carry FAIR plan insurance would cost Meyer almost three times more than what she was used to paying.  It is considered a “plan of last resort,” and would increase her insurance premium from $1900 a year to $6800.  It also wouldn’t provide full coverage and doesn’t include any medical liability protection, theft or water damage coverage.  It reimburses very little compared to her previous plan.

“I’m concerned each year about the fires.  And I’m always glad when we have a Fall rain, but our Fall rains have not been forthcoming,” said Meyer.

Michael Soller, California’s Deputy Insurance Commissioner, said the FAIR Plan is expensive because it covers high risk dwellings.  He explained, “We have a less competitive insurance market in parts of the state.  If you’re in Fresno, you likely have multiple insurance companies competing for your business.  That keeps prices low, and it gives people options.”

Soller said his office is pushing companies to offer more discounts in order to lower fees.  “We currently have eight companies that do offer a discount in the state to people who’ve taken steps to harden their homes,” he said.

However, Meyer was not offered that option.  “It’s a bad situation up here, not just for me, but for everybody up here in the mountain area,” she said.  Meyer filed a complaint with the Commissioner and is encouraging her neighbors who were dropped from their policies to follow suit.  She has also petitioned local lawmakers, State Senator Andreas Borgeas and Assemblymember Frank Bigelow, to make changes.

Borgeas said there aren’t any bills in the legislature to reevaluate the FAIR Plan, but it’s something that he plans to follow up on. “Another problem,” Senator Borgeas’ Press Secretary Blake Zante, explained, is Proposition 103.  “Under that law, the insurance companies’ rates are capped by the Insurance Commissioner.  So, if an insurance company wanted to come in and cover Mary’s house for somewhere in the middle or slightly above the $1900 in order to cover the cost, they are constitutionally barred from doing so without the Insurance Commissioner’s approval.”

In the meantime, mountain residents like Meyer have their hands tied.


Insurance companies dropping mountain community homeowners left and right

Insurance companies drop coverage for hundreds of thousands of homeowners in high wildfire-risk areas, report shows

The California FAIR Plan

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