California Fair Plan Under Fire: Attorney Calls Policies “Criminally Restrictive”
The California Fair Plan, designed as a last-resort insurance option for those unable to secure coverage elsewhere, is now under significant scrutiny. An Oakland attorney has spotlighted troubling issues impacting hundreds of thousands of policyholders.
According to reporter Shandel Menezes from NBC San Diego, Attorney Dylan Schaffer of the Kerley Schaffer law firm has described the policies under the Fair Plan as “criminally restrictive” and asserts that selling these policies constitutes a misdemeanor under Insurance Code 2083. Schaffer claims that last year alone, the California Fair Plan was responsible for approximately 350,000 misdemeanors, characterizing each sale of a Fair Plan policy as a criminal act.
Furthermore, he has disclosed through depositions of senior executives that these alleged practices are being continued primarily for substantial financial savings, often at the expense of policyholders struggling with inadequate coverage.
The Role of the California Fair Plan
Designed as a safety net, the California Fair Plan was created to help residents and businesses who struggle to find insurance through traditional means. However, recent developments have raised serious concerns about its practices and effectiveness.
Seeking Adequate Coverage
Mark Friedlander, a spokesman for the Insurance Information Institute, advises policyholders to seek assistance from licensed insurance agents to ensure they have the right types and levels of coverage. “It’s really important to work with a licensed insurance agent that understands the market and can help you make sure you have adequate types and levels of coverage so that you do not have insurance gaps,” Friedlander said.
Legal Actions and Responses
In response to these allegations, Schaffer has filed a class action lawsuit to hold the California Fair Plan accountable. When approached by NBC 7 for comments, representatives from the insurer and the Department of Insurance declined to comment on the pending litigation.
Broader Implications and Modernization Efforts
California’s Insurance Commissioner, Ricardo Lara, has emphasized the need to modernize the FAIR Plan as part of a broader strategy to stabilize the state’s insurance market. “Modernizing the FAIR Plan is a crucial step in our strategy to stabilize California’s insurance market,” said Lara. He further explained that the growing reliance on the FAIR Plan contributes to the insurance crisis.
Key Components of the Modernization Agreement
The agreement to modernize the FAIR Plan includes several pivotal reforms aimed at improving its efficiency and financial strength:
- Expanded Coverage: Introduction of a new “high-value” commercial coverage option with limits up to $20 million per building and increased limits for residential policies.
- Financial Stability: Implementation of a sound financial formula to protect policyholders in extreme loss scenarios.
- Improved Transparency: Increased public reporting on FAIR Plan activity and customer service metrics.
The forthcoming Plan of Operation, expected within 30 days, aims to clarify options for insurance consumers who may struggle to secure coverage in the regular insurance marketplace as well as surplus companies.
Conclusion
The California Fair Plan, intended to be a fallback for those who cannot get insurance elsewhere, is under intense scrutiny for its practices that allegedly violate state law. With a class action lawsuit underway and calls for modernization from state officials, the future of the FAIR Plan and its policyholders remains uncertain. For now, policyholders are urged to consult with licensed insurance agents to ensure they have adequate coverage and to stay informed on the latest developments.
As this situation unfolds, it underscores the importance of regulatory oversight and the need for transparent, fair insurance practices that protect consumers, especially those in high-risk areas.
Stay tuned for further updates as we continue to follow this story.