California’s insurance commissioner can’t require the California FAIR Plan Association to offer coverage beyond basic property insurance, a state appeals court has ruled.
The decision reins in regulatory authority over the insurer of last resort and resets the boundaries of what FAIR was built to provide.
The ruling came from the California Court of Appeals for the Second Appellate District, Division Three. It overturns a Los Angeles Superior Court decision that had allowed the commissioner to stretch the definition of basic property insurance to include other coverages tied to the insured property.
That lower-court decision followed an earlier order that let the commissioner push the FAIR Plan to expand coverage while stripping out some liability requirements.
Insurance Commissioner Ricardo Lara responded with a revised proposal. That move triggered the appeal.
In a 2021 filing, Lara directed the FAIR Plan to begin offering homeowners policies that included premises liability, incidental workers’ compensation, and related protections.
The FAIR Plan pushed back. In court filings, the association argued those coverages sit outside the legal definition of basic property insurance.
Lara countered that state law allows added coverages as long as they relate to the insured property. The California Department of Insurance supported that view, pointing to a standing agreement dating back to the early 1990s.
That agreement let the FAIR Plan include other coverages tied to property in its businessowners policies. The trial court sided with Lara, saying his interpretation broadly fit within prior-approval rules.
The appeals court disagreed. Judges said property insurance and liability insurance rest on distinct legal and analytical foundations.
Property policies protect against direct physical loss from defined perils. Liability coverage addresses a much wider set of risks, including third-party claims tied to the insured’s actions.
If lawmakers intended to let the commissioner expand property insurance to cover additional risks, the court said, they would have used language referring to added perils. They didn’t.
The statute instead references other insurance coverages, which the court found insufficient to justify importing liability-style protection into a property-only framework.
A FAIR Plan spokesperson welcomed the decision, saying it confirms the association’s role as California’s insurer of last resort, focused on basic property coverage when the voluntary market won’t write a policy.
The spokesperson said the FAIR Plan remains committed to making sure homeowners can still access coverage when alternatives disappear.
The California Department of Insurance said it is reviewing the opinion and declined to comment further.
According to Beinsure analysts, the ruling draws a hard line at a moment when pressure on the FAIR Plan keeps rising. Lawmakers may revisit the statute.
Until then, the court has made it clear. Expanding FAIR coverage requires legislative action, not administrative stretch.
