By Kathleen Eliceiri
On July 22, 2025, the Superior Court of California for the County of Los Angeles issued a decision on Insurance Commissioner Ricardo Lara’s efforts to stabilize the California FAIR Plan. The FAIR Plan is a state-mandated insurance pool that provides basic fire insurance to over 600,000 homeowners and businesses who cannot obtain coverage in the private market. The FAIR Plan issues policies on behalf of its member companies, who are mandated to participate in the FAIR Plan in direct proportion to their market shares of business within the state.
As a result of the Los Angeles wildfires, the FAIR Plan made over $1 billion in claim payments, and regulators warned that it was running out of money. Two Bulletins, 2024-8 and 2025-4, issued by Commissioner Lara, shifted $500 million in claim payments onto policyholders, in an attempt to secure the insurance market. In practice, this passthrough makes California policyholders responsible for reinsuring their own insurer.
In a lawsuit filed in April 2025, in the Superior Court of California for the County of Los Angeles, Consumer Watchdog, a nonprofit consumer advocacy group, sued Commissioner Lara for authorizing this passthrough. Consumer Watchdog had three arguments, and the judge addressed them in order. First, Consumer Watchdog argued the bulletins were a violation of the Administrative Procedure Act (APA), Section 11342.600 of the California Government Code, and the Commissioner’s actions were a form of underground rulemaking. However, the judge held the bulletins were a part of the ratemaking process, which falls under a statutory exemption in the APA.
Second, Consumer Watchdog argued that Commissioner Lara lacked authority under the FAIR Plan’s statutes, California Insurance Code Section 10090. But the judge found that the bulletins were not issued under the FAIR Plan’s authority but instead issued under Proposition 103’s authority. Proposition 103 was a California ballot initiative from 1988 requiring insurers to get approval from an elected Insurance Commissioner before raising rates.
In the third cause of action, Consumer Watchdog argued the passthroughs unlawfully conflicted with the statutory requirement in the FAIR Plan mandating that insurers proportionally share profits and losses. The judge found that Consumer Watchdog could challenge the legality of Commissioner Lara’s plan on this ground. Therefore, Consumer Watchdog’s case is moving forward with a Trial Setting Conference, set for November 25, 2025.
Meanwhile, concerns over the FAIR Plan’s stability are becoming increasingly relevant for consumers. The FAIR Plan is growing at unprecedented rates as more homeowners cannot obtain coverage on the open market and are pushed onto the FAIR Plan. As of September 2025, in a FAIR Plan report, the Plan’s total exposure increased by 52% since September 2024 and by 317% since September 2021. As the FAIR Plan is the only option for many California consumers, the validity of passthroughs to stabilize the $1 billion payouts from the Los Angeles wildfires will be a key issue. There is recently approved legislation that will increase scrutiny on the FAIR Plan. AB 234 (Calderon) (Chapter 474, Statutes of 2025) will put the State’s two top lawmakers, the Speaker of the Assembly and Chairperson of the Senate Committee on Rules, on the governing committee of the FAIR Plan as non-voting members. Governor Newsom signed AB 234 on October 9, 2025.