California Pays for Insurance Struggles and FAIR Plan Dependence

As thousands of homeowners turn to California’s Fair Access to Insurance Requirements Plan for relief following the devastating Palisades and Eaton fires, the culprits behind the state’s insurance crisis—private insurers—continue to dodge responsibility while policyholders are left to suffer.

California’s FAIR Plan wasn’t meant to be a primary insurance option. It was created as a last resort for homeowners abandoned by the private insurance market. But due to the growing exodus of insurers from wildfire-prone areas, more and more Californians don’t have options besides the underfunded program.

The trend of private insurers pulling out of high-risk areas accelerated after PG&E’s 2019 bankruptcy left more than $30 billion in wildfire liabilities for the Camp, Wine Country, and North Bay fires. Insurers are pulling out of entire regions, leaving homeowners with nowhere else to turn—while continuing to rake in profits from less risky policies elsewhere.

Pursuant to California law, private insurers must cover the financial obligations of failed insurers, including the FAIR Plan. PG&E’s collapse increased these costs, pushing more insurers to scale back coverage and forcing more homeowners onto the FAIR Plan. The FAIR Plan is on the brink of collapse with only $377 million in available funds to cover claims—compared to the estimated $900 million in claims from the latest wildfires alone.

In many cases, homeowners go to extensive lengths to remove brush, upgrade their properties, and/or perform unnecessary repairs only to be denied coverage even after taking such actions. What’s worse: many homeowners are denied insurance renewals despite gathering and submitting evidence proving that the reasons are false.

David Ginsberg and Yvonne Davis maintained their Chatsworth property for over 30 years and upon receiving notice of non-renewal based on alleged hazards including debris hazards, roof condition, and a branch overhang. Despite promptly providing evidence refuting these claims, Safeco Insurance upheld their non-renewal. In San Diego County, homeowner Maria Badin diligently maintained her property for 31 years before her insurance policy was wrongfully non-renewed when Liberty Mutual falsely claimed her roof had algae, mildew, mold, or moss despite a professional inspection confirming no such hazards existed.

If the FAIR Plan exhausts its reserves, it has the authority to levy financial assessments on private insurers to make up the shortfall. But rather than step up and take responsibility, insurers will likely raise premiums, restrict coverage, or leave the California market altogether. Their refusal to operate in high-risk areas forces more people onto the FAIR Plan, creating a vicious cycle that benefits insurers at the expense of homeowners.

The consequences of relying on the FAIR Plan are hitting home. Many wildfire victims’ claims are delayed due to the volume of filings. Some are discovering the hard way that their FAIR Plan policies don’t cover crucial post-fire costs such as structural instability, or smoke and water damage. Others are bracing for inevitable rate hikes as insurers shift the financial burden onto policyholders rather than taking responsibility for the mess they helped create.

And then there’s the specter of bad faith insurance practices. As insurers retreat from California’s wildfire zones, they continue to prioritize their bottom line over policyholders’ rights. That means unfair claim denials, drawn-out processing times, and outright refusals to pay what is owed. Homeowners who’ve lost everything in a fire shouldn’t have to fight for the compensation they paid for and were promised—but insurers have made this the norm.

California’s wildfire crisis isn’t going away, and neither is the growing reliance on the FAIR Plan. But we can’t allow insurers to continue exploiting the system while homeowners bear the cost. Lawmakers must act now to hold insurers accountable, forcing them to stay in high-risk areas, increasing their financial obligations to the FAIR Plan, and implementing stronger protections against bad faith insurance practices.

At a time when climate change is fueling more frequent and severe wildfires, California needs an insurance industry that serves homeowners. Instead, insurers have spent years abandoning communities and maximizing their own profits. The FAIR Plan was meant to be a safety net—not a loophole for private insurers trying to evade responsibility. Homeowners deserve better, and it’s time insurers are forced to do their part.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Michelle Meyers is partner and member of the fire litigation practice group at Singleton Schreiber.

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