How the California FAIR Plan Is Holding Up on the LA Fire Claims

Originally shared on X and Nextdoor.

The state’s insurer of last resort took the biggest hit in its history from the January 2025 Palisades and Eaton fires. Estimated losses run around $4 billion. As of the state’s January 2026 oversight hearing, the Plan had paid close to $3.5 billion to policyholders. So the headline question, is it paying claims, has a clear answer: yes, in volume.

The money side

On the money side, the Plan ran out of money fast. Its retained earnings were gone, so in early 2025, the Commissioner approved a $1 billion assessment on every insurer doing business in California, the first such assessment in about 30 years (California FAIR Plan). The Plan also tapped a reinsurance tower worth up to $5.78 billion. In 2025, the Legislature added bonding authority, allowing the Plan to borrow against future revenue rather than relying solely on assessments and rate hikes. The Plan has requested a 36% rate increase to remain solvent. The translation: the Plan is not going broke, but the cost of keeping it afloat is landing on policyholders and the broader market.

The real trouble: partial and smoke claims

The real trouble is how the Plan handles partial losses, especially smoke, soot, and ash in homes that did not burn down. Roughly 45% of the fire claims were partial losses, and many policyholders say the Plan underpaid or denied them. The state has come down hard. In July 2025, the Insurance Commissioner filed a cease-and-desist order with penalties over illegal smoke-damage denials (California Department of Insurance). In early 2026, a court ruled the Plan’s smoke-damage policy language illegal (United Policyholders). A state Report of Examination found the Plan had failed to implement most of the regulator’s recommendations, and a reform bill, the Make It FAIR Act, is now moving to force changes (California Department of Insurance). Separate lawsuits accuse insurers of pushing homeowners onto the Plan in the first place.

What this means for you

For anyone relying on the FAIR Plan, the lesson is simple. It will pay on a clear total loss, and it has the financial backing to do so. But it is a stripped-down policy run by an insurer that fights partial and smoke claims. If your home is standing but contaminated, document everything, pay for independent industrial-hygiene testing, and do not accept a quick denial as final. And if the FAIR Plan is your only fire option, pair it with a difference-in-conditions (DIC) policy to cover the gaps it leaves open, although partial damages from fires are likely not available.

Sources

• California Assembly: FAIR Plan background, January 2026 oversight hearing
• California FAIR Plan takes steps to access funds to pay LA fire disaster claims
• California Department of Insurance, press release 054-2025
• United Policyholders: judge rules the FAIR Plan’s smoke-damage policy illegal
• California Department of Insurance, press release 005-2026