California lawmakers are weighing a significant overhaul of the state’s insurer of last resort, a move that could reshape how brokers place homeowners’ coverage in one of the most challenging property markets in the US. Legal experts have questioned whether newly proposed reforms could meaningfully bridge the protection gap for homeowners and relieve pricing pressure in the market, which has been strained by wildfire risk in recent years.
Assembly Bill 1680, known as the Make it FAIR Act, would mandate new transparency, governance, and coverage requirements for the California FAIR Plan Association, which has rapidly expanded as private insurers pull back from wildfire-exposed regions. The FAIR Plan, created in 1986 as an insurer of last resort, has grown into one of California’s largest property insurers as major carriers (including State Farm, Allstate, Farmers, Travelers, Chubb, Nationwide, and USAA) have stopped writing new business or non-renewed existing policies in high-risk areas.
The Make it FAIR Act follows a December 2025 “Report of Examination” issued by the California Department of Insurance, which identified what Insurance Commissioner Ricardo Lara described as systemic failures in the FAIR Plan’s operations, particularly after the 2025 Los Angeles wildfires.
In announcing the bill, Insurance Commissioner Ricardo Lara said long-standing deficiencies within the FAIR Plan had been exposed, not created, by recent catastrophes.
“Families with standing homes are still fighting for simple answers about contamination and safety, and that is unacceptable,” Lara said. He argued that the Make It FAIR Act would convert years of regulatory pressure into enforceable requirements around claims handling, accountability, and coverage adequacy.
Assembly Insurance Committee Chair Lisa Calderon framed the legislation as a response to market dysfunction, adding that as private carriers continue to non-renew or exit high-risk regions, the FAIR Plan must evolve from a bare-bones safety net into a more dependable source of coverage.
“As market conditions change, the FAIR Plan needs to evolve to meet these needs,” said Calderon. “Californians do not want to be non-renewed, but if they are, we need to ensure comprehensive coverage is available. Providing more stability and options at a time when the voluntary insurance market is still playing tug-of-war is needed now, in this moment.”
Richard Giller, partner and chair of the Insurance Recovery and Counseling Group at Greenspoon Marder, called the legislation an act of “virtue signaling,” driven in part by a 2025 CBS News investigation that raised concerns about secrecy and governance within the California FAIR Plan Association.
“While the new bill is certainly a step in the right direction, it does virtually nothing to assist individual homeowners in securing greater insurance coverage; those homeowners whose only real property insurance option is to purchase a FAIR Plan policy,” Giller told Insurance Business.
One of the core issues is the limited nature of FAIR Plan coverage. Unlike standard homeowners policies, FAIR Plan policies typically exclude personal liability, additional living expenses, and replacement-cost valuation. Coverage is generally limited to actual cash value, with a $3 million cap, which typically falls short for higher-value homes in areas such as Malibu, Pacific Palisades, and parts of Pasadena and Altadena.
These limitations have forced many brokers to assemble layered or wraparound solutions, often combining FAIR Plan coverage with Difference in Conditions (DIC) policies from surplus lines markets, if those options are available at all.
AB 1680 is framed as a legislative fix to long-standing operational issues. While the Insurance Commissioner cited 17 “critical recommendations” that the FAIR Plan failed to implement, Giller noted that many of these findings date back to a 2022 operational assessment.
“An important unanswered question remains: why did it take the State Assembly or the Insurance Commissioner’s office so long to discover that the majority of the 2022 recommendations had not yet been implemented?” he asked.
Among the most serious issues, said Giller, is claims handling, especially for smoke and ash damage following wildfires. He cited multiple lawsuits alleging that the FAIR Plan improperly denied or restricted smoke and ash claims, despite such damage potentially qualifying as “direct physical loss” under California’s standard fire policy statutes.
Joe Balice, counsel in Haynes Boone’s Litigation and Insurance Recovery groups, agreed that claims operations are central to the reforms.
“These issues are critical to homeowners who desperately need prompt handling and payment of their claims following a loss, particularly when the state is under siege by large-scale catastrophes like the 2025 Los Angeles fires,” noted Balice. “Many of the recommendations also seek to improve transparency, oversight and auditing, all of which should help promote policyholders’ interests on a program structure level.”
The Make it FAIR Act directs regulators to explore expanding FAIR Plan coverage to more closely resemble a standard HO-3 homeowners’ policy. That could include higher limits, fair rental value coverage for renters, water damage coverage, and even third-party liability coverage.
Balice said this would be a meaningful shift. “This would be of tremendous benefit to many homeowners who either have to seek separate commercial insurance for these coverages in addition to their FAIR Plan policies, or go without coverage on these risks if commercial insurers refuse to sell them policies,” he added.
But both attorneys caution that broader coverage almost certainly means higher premiums. Giller pointed out that insurers’ reluctance to write business in California stems in part from regulatory constraints on pricing catastrophe risk, particularly wildfire exposure.
“It is not altogether clear how the ‘Make it FAIR Act’ will allow for more comprehensive coverage under the FAIR Plan policies without significantly increasing the cost of the new coverage,” said Giller.
Not surprisingly, the bill has drawn sharp criticism from the industry.
The American Property Casualty Insurance Association (APCIA) warned that mandating expanded coverage could “balloon” the FAIR Plan and undermine efforts to restore a functioning private market. The industry body argued that expanding coverage without sustainable pricing and adequate reserves could leave all Californians on the hook for future shortfalls.
From a compliance standpoint, AB 1680 does not impose direct new duties on brokers. However, Balice said agents will face indirect pressure to stay current on evolving FAIR Plan offerings, eligibility rules, and pricing, especially if the plan’s scope expands.
“The Act itself doesn’t appear to impose specific obligations and duties on brokers and agents in the state, said Balice. “But it is evident that brokers and agents will need to stay informed on the changing landscape of homeowners coverage to serve policyholders.”
