Surcharges that California homeowners have been hit with statewide by insurers defraying the costs of Los Angeles County\u2019s wildfires were ruled legal in a decision released late Tuesday.<\/p>\n
L.A. County Superior Court Judge Tiana Murillo turned down a petition<\/a> by advocacy group Consumer Watchdog to halt the charges, which insurers began levying last year after the state\u2019s insurer of last resort couldn\u2019t pay all its January 2025 fire claims.<\/p>\n The California FAIR Plan, financially backed and operated by the state\u2019s licensed home insurers, needed a $1-billion bailout<\/a> from the insurers after it was hit with some $4 billion in claims. <\/p>\n Under a deal Insurance Commissioner Ricardo Lara worked out with the FAIR Plan in 2024, the insurers could seek state approval to surcharge their residential policyholders for up to half of any assessment totaling $1 billion in case the plan needed a bailout in an \u201cextreme worst case scenario\u201d \u2014 as it turned out it did.<\/p>\n A total of 105 insurers, including State Farm General<\/a> \u2014 California\u2019s largest home insurer \u2014 Farmers and Mercury sought and received approval for the surcharges.<\/p>\n Because the FAIR Plan assessed its member insurers based on their share of the state\u2019s home insurance market, the policyholder surcharges were in the same ballpark. The median fee for homeowners was $28, according to the department of insurance.<\/p>\n The fee can be more or less according to the size of a homeowner\u2019s premium and is split into monthly payments that insurers can spread over one or two years. Condo owners and renters on average were surcharged less.<\/p>\n In a court filing, Consumer Watchdog said $420 million in surcharges were approved. <\/p>\n In its April 2025 lawsuit filed against Lara<\/a>, the Los Angeles group made a series of arguments in seeking to overturn the residential surcharges, which it deemed an industry bailout. It did not sue over related commercial surcharges.<\/p>\n Consumer Watchdog contended in its lawsuit that the surcharges violated Proposition 103 \u2014 the 1988 measure that governs insurer rate hikes \u2014 because the proposition does not allow for them.<\/p>\n It also claimed Lara did not follow regulatory protocol in promulgating the new policy.<\/p>\n The group further alleged that the FAIR Plan\u2019s governing statutes do not give Lara the authority to permit the surcharges \u2014 and that the statutes require insurers to share in the plan\u2019s profits and losses, and not shift losses to policyholders.<\/p>\n Murillo, and another judge who previously heard the case, turned down all of the consumer group\u2019s arguments in separate rulings, the last of which Murillo issued Tuesday night.<\/p>\n Lara celebrated his legal victory over Consumer Watchdog, which has accused Lara of having close ties to insurers and sought to oust him from office. His terms ends in January. <\/p>\n \u201cThis victory sends a loud and clear message: The era of allowing special interests to derail consumer choice is over. We have the momentum, we have the authority, and we will continue to fight until every Californian has access to the coverage they deserve,\u201d Lara said in a statement.<\/p>\n Attorney Will Pletcher, litigation director of Consumer Watchdog, said the group disagreed with the decision and would \u201cconsider all options to move this forward.\u201d<\/p>\n \u201cIt\u2019s important to try to protect California consumers from these surcharges that we think are in pretty clear conflict with both Proposition 103 and the FAIR Plan,\u201d he said.<\/p>\n Hilary McLean, a spokesperson for the plan, said in a statement it did not have any position on the ruling, given the plan \u201cdoes not have a role in determining how insurers manage costs associated with assessment.\u201d<\/p>\n Denni Ritter, vice president of state government relations for the American Property Casualty Insurance Assn., a major industry trade group, said the decision rejected \u201cthe reckless lawsuit brought by the self-interested group Consumer Watchdog…\u201d<\/p>\n \u201cThis ruling preserves a vital tool to protect the stability of the California insurance market. Blocking cost recovery would have undermined the state\u2019s last-resort coverage option,\u201d she said in a statement.<\/p>\n The 2024 policy was issued in response to the rapid growth of the plan due to a series of wildfires over the last decade that prompted multiple insurers to retreat from the state\u2019s home insurance market.<\/p>\n The plan had 264,000 homeowners on its rolls in September 2022, a figure that rose to 452,0000 in the months before the fires \u2014 and its residential policyholders have since increased to 663,000 as of March.<\/p>\n The FAIR Plan offers policies that typically cost more than those issued by regular insurers while offering less coverage.<\/p>\n A Times analysis<\/a> last year found that in the Palisades and Eaton fire zones, the plan\u2019s rolls nearly doubled to 28,440 from 2020 to 2024.<\/p>\n That concentration of policyholders led to the plan\u2019s large losses during the Jan. 7 wildfires<\/a>, which damaged or destroyed more than 18,000 structures, killing at least 31 people. <\/p>\n It\u2019s been estimated that the insured losses for the wildfires could ultimately total as much as $40 billion, exceeding any past wildfires worldwide. Ritter said that so far insurers have paid $23.7 billion in claims.<\/p>\n The 2025 wildfires were not the only time the FAIR Plan has needed a bailout, though it is the first time its member insurers surcharged policyholders.<\/p>\n