April 17, 2025 | JacobiJournal.com – A consumer advocacy group has filed a lawsuit against the California Department of Insurance and Commissioner Ricardo Lara, seeking to block hundreds of millions in new insurance surcharges set to impact homeowners statewide. Consumer Watchdog alleges that the Department’s recent decision allows private insurers—who operate the state’s FAIR Plan, California’s insurer of last resort—to pass catastrophe-related costs onto policyholders, rather than absorbing them as the law requires.
$500 Million Burden on Homeowners
The dispute stems from a $1 billion FAIR Plan assessment approved in February, after wildfires swept through Palisades and Eaton Canyon. Consumer Watchdog argues that the decision allows up to $500 million in costs to be pushed onto homeowners, undermining the purpose of the FAIR Plan.
“The commissioner’s decision is unjustified,” said Ryan Mellino, staff attorney for Consumer Watchdog. “It shifts risk to the public while profits remain with the insurers.”
According to the group, the decision violates the Administrative Procedure Act, as it was made without public input. The lawsuit also claims the pass-through surcharges breach FAIR Plan statutes, which mandate that insurance companies must share in both the profits and losses of the plan.
Industry Pushes Back
In response, the American Property Casualty Insurance Association (APCIA) slammed the lawsuit as a “reckless stunt.”
“Blocking cost recovery jeopardizes last-resort coverage for homeowners,” said Denni Ritter, APCIA’s VP of state government relations. “This move could push California’s already fragile insurance market toward collapse.”
Ritter argued that distributing recovery costs across a broader base helps stabilize the market and keeps essential coverage available to more Californians.
State Regulator Responds
Gabriel Sanchez, press secretary for the Department of Insurance, said the lawsuit hinders efforts to provide homeowners and small businesses with reliable insurance options. He noted that the goal is to transition consumers away from the limited and expensive FAIR Plan to more competitive coverage options.
“This litigation harms the very people it claims to protect,” Sanchez said. “It also undermines our work to strengthen the insurance market overall.”
Advocacy Group Warns of Future Impact
Consumer Watchdog maintains that the policy sets a dangerous precedent, potentially paving the way for billions more in future surcharges.
“California homeowners have already suffered enough,” Mellino said. “This is an unlawful bailout that prioritizes insurance companies over everyday Californians.”
Despite the backlash, the insurance industry points out that it has already contributed over $500 million to support the FAIR Plan’s solvency—without collecting premiums from FAIR Plan policyholders.
Consumer Watchdog’s full legal petition is available here.
FAQs: California FAIR Plan Surcharge Lawsuit
What is the California FAIR Plan surcharge lawsuit about?
The California FAIR Plan surcharge lawsuit challenges a decision allowing private insurers to pass wildfire recovery costs onto homeowners instead of absorbing them.
Who filed the California FAIR Plan surcharge lawsuit?
Consumer Watchdog, a California-based advocacy group, filed the lawsuit against the Department of Insurance and Commissioner Ricardo Lara.
How could the California FAIR Plan surcharge lawsuit affect homeowners?
If upheld, the surcharges could add up to $500 million in costs for homeowners statewide, potentially setting a precedent for future assessments.
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