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California Commercial Business Insurance Coverage Limit Increases

As part of a comprehensive effort to give more insurance options to California residents and businesses, state Insurance Commissioner Ricardo Lara announced the California FAIR Plan Association has agreed to more than double its existing commercial coverage limits to $20 million for businesses unable to find coverage in the normal insurance marketplace. The FAIR Plan is an association comprised of all insurers authorized to transact basic property insurance in California, and designed to be the state’s property “insurer of last resort,” writing coverage for businesses and residences when other insurance options are not available.

Commissioner Lara and the FAIR Plan have been working on this issue since the Commissioner’s investigatory hearing into the FAIR Plan last July where homeowners associations, youth recreational camps, agricultural groups, and other businesses spoke about the growing need for greater commercial coverage limits. Prior to Commissioner Lara taking office in 2019, the FAIR Plan’s commercial limits had not been adjusted in more than two decades to keep pace with increasing property values and coverage needs.

“Giving businesses greater options for insurance coverage is a top priority of mine. I am pleased the FAIR Plan is stepping up when insurance companies fall short in providing businesses and homeowners access to the coverage they need,” said Commissioner Lara. “I will continue working to expand coverage options and drive down the costs of insurance through wildfire safety discounts and increasing competition in the market.”

The agreement signed by Commissioner Lara and FAIR Plan President Victoria Roach will increase the combined coverage limits for the FAIR Plan, under its Division I Commercial Property Program, from $8.4 million to $20 million per location and, under its Division II Businessowners Program, from $7.2 million to $20 million per location.

“The FAIR Plan is committed to strengthening consumer choice in the voluntary insurance market and ensuring all Californians have access to basic property coverage,” said Roach. “We appreciate Commissioner Lara’s leadership to take this step forward to address the challenges in the current commercial coverage market, while attempting to balance those challenges with the need for stability in the insurance market. We welcome the opportunity to continue collaborating with the Department of Insurance, the Legislature and other stakeholders to restore a viable insurance market for all Californians regardless of where they reside.”

State legislators joined Commissioner Lara’s call for an increased commercial coverage limit at the FAIR Plan in letters sent earlier this year.

“I applaud Insurance Commissioner Lara and the California FAIR Plan for working together to increase access to coverage for homeowners in high fire risk areas,” said Senate President pro Tempore Toni G. Atkins (D-San Diego). “Longer, more devastating fire seasons mean that Californians are feeling the impacts of climate change now. Expanding coverage is an important step towards preventing further displacement and protecting homeowners throughout the state. I look forward to continued conversations on how to make insurance more accessible for residents in high fire risk areas.”

The new coverage limits will take effect after the FAIR Plan submits a new rule filing for approval by the Department of Insurance. The FAIR Plan has 60 days to submit a rule filing to the Department, with the goal of the Department approving these coverage limit increases, meaning coverage could be available in the fourth quarter.

“This action to increase the California FAIR Plan’s commercial coverage limit will improve access to fire insurance coverage for our businesses as well as multi-residential properties across our high fire risk areas,” said Senator Marie Alvarado-Gil (D-Jackson). “As a member of the Senate Committee in Insurance, I look forward to continuing to work with Commissioner Lara and my colleagues to deliver solutions to the fire insurance crisis impacting so many across (my)Senate District 4 and our entire state.”

Business groups also welcomed the additional coverage.

“California’s diverse farms need more than a one-size-fits-all solution for insurance,” noted California Farm Bureau President Jamie Johansson. “Increased FAIR Plan coverage limits give farm families greater options and security to plan for the future. We thank Commissioner Lara for continuing to support our agricultural community.”

“The increase in commercial coverage amounts provided by the FAIR Plan offers a much-needed reprieve for the summer camps of California. Summer camps provide valuable opportunities for California’s youth but, in recent years, challenges to camps have been exacerbated by increasing costs for insurance coverage, and too often the coverage that was available came at too high a cost for these small businesses to afford,” said Mike Stillson, Chair of the California Collaboration for Youth. “This action by Commissioner Lara will provide the opportunity to properly insure our camps, buildings, and property moving forward, insuring our infrastructure in order to provide services to the youth of California. The California Collaboration for Youth thanks Commissioner Lara for once again working to help summer camps provide unforgettable experiences for the children of California.”

Since taking office, Commissioner Lara has prioritized increasing access to affordable insurance for California consumers and businesses. In October 2022, Commissioner Lara enforced the nation’s first Safer from Wildfires regulation requiring wildfire safety discounts for homes and businesses. In November 2021, Commissioner Lara ordered the FAIR Plan to increase its combined commercial coverage limits for the first time and, in November 2019, he ordered the FAIR Plan to increase its personal dwelling coverage limit to $3 million, doubling it from where it had been for two decades.