Ashes to Action:
California’s Regulatory Responses to the Wildfires

The Palisades and Eaton fires have resulted in significant regulatory activity. For easy access, we have provided below a brief summary of and links to wildfire-related bulletins, notices, and press releases, as applicable, issued by the California Insurance Commissioner (Commissioner), the California Surplus Line Association, and the California Fair Access to Insurance Requirements Plan (the FAIR Plan). We will update this article when new information is issued. We will also provide an update regarding the U.S. House Financial Services Committee meeting to discuss the California wildfires that was held on February 11, 2025.

• Emergency Rate Request. On February 15, 2025, the Commissioner issued a press release regarding, and made public a letter to, a major insurer with respect to the insurer’s request for an “emergency interim rate increase” under Proposition 103’s prior approval process. In the press release and letter, the Commissioner stated that he has scheduled an in-person meeting on February 26, 2025 with the insurer, the intervenor Consumer Watchdog group, and his staff to address such matters as the insurer’s financial stability, justification for the emergency rate increase, consumer impact, and transparency in decision-making.
  
  Click here for a copy of the press release, and click here for a copy of the Commissioner’s letter.

• Additional Living Expense Coverage When Homes are Uninhabitable. On February 14, 2025, the Commissioner issued another notice regarding additional living expense coverage. (See Bulletin 2025-2, discussed below). In this notice, the Commissioner reminded insurers to exercise due diligence in determining whether a home is habitable or uninhabitable. In particular, he noted that the fact that an area is now accessible does not automatically mean the residences in those areas are habitable, especially given ongoing health and safety concerns regarding the fire-damaged areas.
  
  Click here for a link to the notice.

• Updated Guidance – Recoupment Procedures for FAIR Plan Assessments. On February 11, 2025, the Commissioner issued Bulletin 2025-4. The bulletin provides updated guidance regarding the procedure through which the FAIR Plan’s member insurers may request prior approval under Proposition 103 to seek recoupment from their policyholders for FAIR Plan assessments. Insurers were previously notified of these procedures in Bulletin 2024-8, discussed below. The new bulletin instructs insurers to submit a Proposition 103 “rule-change” rate application to collect “temporary supplemental fees to recoup a portion of [their] FAIR Plan assessment.” The Bulletin goes on to list a number of filing requirements, including the need for insurers to file the application “within six months from the date of the FAIR Plan’s assessment notice….”
  
  Also, the bulletin appears to clarify the assessment percentage that can be recouped from policyholders. In prior Bulletin 2024-8, the Commissioner noted that, for assessments up to US$1 billion, insurers can recoup “up to 50% of amounts assessed as described in [paragraph 1 of Bulletin 2024 8],” and that for assessments that exceed US$1 billion, insurers can “recoup all amounts assessed as described in [paragraph 2 of Bulletin 2024 8].” That seemed to imply that, on assessments in excess of US$1 billion, insurers could recoup the entire assessment from policyholders. In Bulletin 2025-4, the Commissioner clarified that the 100% recoupment percentage only applies to that portion of the assessment above US$1 billion.
  
  Click here for a link to Bulletin 2025-4.
• Commissioner Approves US$1 Billion FAIR Plan Assessment. On February 11, 2025, the Commissioner issued Order No. 2025-1 approving a request by the FAIR Plan to levy an assessment totaling US$1 billion on its member insurance companies to ensure that the FAIR Plan would have sufficient operating capital to continue paying policyholder claims without interruption. In particular, the Commissioner ordered that:
  
  • The FAIR Plan’s request for an assessment in the amount of US$1 billion is APPROVED;
  • The FAIR Plan must calculate each member insurer’s assessment participation in accordance with the Plan of Operation (link below) and California Insurance Code §§ 10094 and 10095;
  • [The] Order is final immediately upon execution; and
  • Once served with an executed copy of [the] Order, the FAIR Plan may immediately begin issuing assessment participation notices to its member insurers, with member insurers to remit payment to the FAIR Plan within 30 days of the date that the FAIR Plan sends notice of the amount due.
  
  Click here for a link to the Commissioner’s Order No. 2025-1, which includes a copy of the FAIR Plan’s assessment request, and click here for a link to the Commissioner’s Order No. 2024-2 approving the referenced FAIR Plan’s Plan of Operation.
• Update from the FAIR Plan. On February 7, 2025, the FAIR Plan issued an update regarding its management and payment of claims related to the Southern California wildfires. In its update, the FAIR Plan noted, among other things, that:
  
  • Managing Covered Claims:
    • The FAIR Plan has received approximately 3,485 claims for damage caused by the Palisades Fire, and approximately 1,314 claims for damage caused by the Eaton Fire.
    • The FAIR Plan has so far paid more than US$700 million to policyholders, including advance payments, to cover claims related to the Palisades and Eaton fires.
    • Approximately 45% of the wildfire claims are reported as total losses, 45% are reported as partial losses, and 10% are reported as Fair Rental Value only.
  • Reinsurance:
    • The FAIR Plan is accessing reinsurance to help pay claims.
    • It can access the first US$350 million in available reinsurance for anticipated claims payments and related expenses above the US$900 million deductible.
    • It can access additional layers of reinsurance based upon losses incurred and outstanding reserves up to a US$5.78 billion limit, which includes varying percentages of co-reinsurance, similar to co-pays, subject to certain conditions.
    • To access all layers of available reinsurance, the FAIR Plan is responsible for paying up to approximately US$3.5 billion, including the US$900 million deductible, and co-pays.
  • Assessments:
    • The FAIR Plan has not yet asked the Commissioner for an assessment in response to the Southern California fires.
  • L.A. Wildfire Exposure:
    
    • The latest estimates approximate that the FAIR Plan has a total potential exposure of over US$4 billion for the Palisades Fire and US$775 million for the Eaton Fire.
    • “Exposure” does not equal “loss.” Exposure means the total amount of insurance for a particular property or group of properties. It does not necessarily equate to the number of claims made or the anticipated claims and expense payments related to those claims.
  
  Click here for a link to the FAIR Plan’s update.
• Personal Property Insurance Claims. Following up on Bulletin 2025-2 (discussed below), the Commissioner issued a notice on February 6, 2025, suggesting that insurers offer 75%, 80% or, in some cases, 100% of contents limits without an inventory, with the ability for the insureds to recover additional benefits if they subsequently complete a full inventory up to their contents coverage limits. The Commissioner also requested that insurers with total loss claims advise the California Department of Insurance by February 28, 2025, as to whether or not they will comply with this request and under what terms. This request goes beyond what’s required under applicable law, which provides that in the event of a covered total loss resulting from a state of emergency the insurer must offer a payment under the contents (personal property) coverage in an amount no less than 30% of the policy limit applicable to the covered dwelling structure, up to a maximum of US$250,000, without requiring the insured to file an itemized claim. Click here for a link to the notice, and click here for the Commissioner’s related press release.
• Wildfire-Related Floods and Mudslides. On February 4, 2025, the Commissioner issued Bulletin 2025-3. The bulletin reminds insurers of their legal duty to cover damage from any future mudslide or similar disaster that is caused by recent wildfires that weakened hillsides. The Commissioner noted that homeowners’ and commercial insurance policies typically exclude flood, mudslide, debris flow, and similar disasters unless they are directly or indirectly caused by a recent wildfire or another peril covered by the policy. Click here for a link to the bulletin, click here for a link to the Commissioner’s fact sheet for consumers to answer questions about what their policies cover, and click here for the Commissioner’s related press release.
• Claims Tracker. On January 30, 2025, the Commissioner announced the creation of a public consumer claims tracking system designed to provide essential data for the public. The tracker lists the number of claims filed, the number of claims partially paid, and the dollar amount of claims paid to date. Click here for a link to the tracker.
• Consolidated Debris Removal Program. On January 30, 2025, the Commissioner issued a notice regarding the consolidated debris removal program. Generally, the program will result in no out-of-pocket costs to the property owner over and above any insurance proceeds provided to the property owner for debris removal. The program is also expected to reduce the amount an insurance company would otherwise be obligated to pay for this service as compared to the significant costs associated with private debris removal contractors that follow the required testing and permitting requirements outlined by Los Angeles County regarding debris removal requirements in a disaster situation. Click here for a link to the Notice.
• Advance Claim and Living Expense Payments. On January 23, 2025, the Commissioner issued Bulletin 2025-2. This bulletin reminds insurers, among other things, that once a property is determined to be a total loss, California law requires that certain advance payments be made to insureds, including the following:
  
  • Additional Living Expense Advance Payment: In the event of a covered loss relating to a state of emergency under a residential property insurance policy, if a policyholder has made a claim for additional living expenses related to a total loss, the insurer is required to render an advance payment of no less than four months of living expenses. Additional payments for living expenses are payable upon proper proof following the advance period.
  • Payment of Contents Without Inventory: In the event of a covered total loss of a primary dwelling under a residential property insurance policy resulting from a state of emergency, if the residence was furnished at the time of the loss, the insurance company shall offer a payment under the contents (personal property) coverage in an amount no less than 30% of the policy limit applicable to the covered dwelling structure, up to a maximum of US$250,000, without requiring the policyholder to file an itemized claim.
  • Mandatory renewal: After a total loss, an insurer must offer to renew a policyholder’s policy for at least the next two renewal periods (for no less than 24 months).
  
  Click here for a link to Bulletin 2025-2, and click here to the Commissioner’s related press release.

• Moratorium on Cancellations and Non-Renewals. On January 17, 2025, the Commissioner issued Bulletin 2025-1. This bulletin reminds insurers, among other things, of the following:
  • Cancellations/Non-Renewals: No admitted or nonadmitted insurer shall issue a notice of cancellation or non-renewal due to wildfire risk for any policies of residential property insurance, including all homeowners’, condo unit owners’, mobile homeowners’, or residential renters’ insurance policies, that are located in the identified ZIP codes.
  • Premium Grace Period: In the event of a state of emergency, insurance companies must offer a 60-day grace period for the payment of premiums for residential property insurance policies for property located within the affected area. 
  • Rescind Pre-Wildfire Cancellations/Non-Renewals: The Commissioner also noted that there are homeowner insureds that may be up for non-renewal or cancellation that do not fall within the scope of these statutory protections — that is, pre-wildfire pending cancellation/non-renewal notices. For those insureds, the Commissioner called on all insurers to forego any pending cancellations/non-renewals that are due to take effect on residential properties located within and around the referenced ZIP codes.

Click here for a link to Bulletin 2025-1, click here for the Commissioner’s related Notice 2025-01, and click here and here for the Commissioner’s related press releases.

Also, as nonadmitted insurers are noted as being subject to the moratorium, on January 13, 2025, the California Surplus Line Association (SLA) issued Bulletin #1492 regarding the Commissioner’s moratorium on cancellations/non-renewals. Click here for a link to the SLA bulletin.

• Commissioner Declaration of Emergency — Adjusters. On January 13, 2025, the Commissioner issued a Declaration of Emergency Situation. Pursuant to the declaration, insurers and licensed insurance adjusters may use non-licensed adjusters to the extent such use is reasonably necessary to respond to losses arising out of the wildfires if each of the following requirements are met:
  
  • The work performed by non-licensed adjusters is under the active oversight licensed adjuster, qualified manager, or insurer authorized to do business in California.
  • Non-licensed adjusters are required to register with the Commissioner within 15 days from the date on which they commenced wildfire claims adjusting activities. Registration is valid for 180 days from registration.
  • All claims adjusters, whether California-licensed or not, who are assigned to wildfire claims must be properly trained on the California Unfair Practices Act, the Fair Claims Settlement Practices Regulations, and all laws relating to property and casualty claims handling.
  
  Click here for a link to the declaration, and click here for the Commissioner’s related press release.
• Public Adjusters. On January 10, 2025, the Commissioner issued a notice reminding public adjusters that they are prohibited from soliciting business from disaster victims until seven days after the conclusion of the loss-producing event. Public adjusters represent insureds. Click here for a link to the notice.
• Guide for Adjusting Claims. On January 9, 2025, the Commissioner issued a 30-page guide for adjusting property claims after a major disaster. Click here for a link to the guide.
• 2025 Annual Notice. On January 9, 2025, the Commissioner issued its annual notice to admitted insurers and licensed insurance adjusters describing the most significant California laws pertaining to property insurance policies, including those related to a declared state of emergency. Click here for a link to the notice.
• Health Insurers — Access to Coverage Plan. On January 8, 2025, the Commissioner issued a notice to health insurers reminding them of their need to submit a notification to the Commissioner describing whether the insurer has experienced or expects to experience any disruption in its operations, explaining how the insurer is communicating with potentially affected insureds, and summarizing the actions the insurer has taken (or is in the process of taking) to ensure that the healthcare needs of insureds are met. The notification is required to include information demonstrating that insureds have access to medically necessary healthcare in affected areas. Click here for a link to the notice, and click here for the Commissioner’s related press release.
• FAIR Plan Recoupment Procedures. On September 24, 2024, only a few months prior to the Palisades and Eaton wildfires, the Commissioner issued Bulletin 2024-8. This bulletin discussed the procedure through which the FAIR Plan’s member insurers may request the Commissioner’s prior approval under Proposition 103 to seek recoupment from their policyholders of any FAIR Plan assessments in what was then referred to as “the highly unlikely event that the FAIR Plan levies an assessment, an occurrence which has not happened since 1994, despite significant wildfires that have occurred since 2017.” Click here for a link to the bulletin.
• California FAIR Plan. The California FAIR Plan is available to California residents and businesses in urban and rural areas who cannot obtain insurance through a regular insurance company. Although the FAIR Plan’s press releases are geared toward policyholders and not, necessarily, insurers, we have provided a link here for reference.

The descriptions of the bulletins, notices, press releases, and the like, above, reflect the position of the party issuing those materials, and should not be construed as the opinion of Sidley Austin LLP.