This article describes the eligibility criteria and coverage of the California Fair Access to Insurance Requirements (FAIR) insurance policy.

When to seek coverage

A single-family residential home located in the Malibu Hills in Los Angeles County is listed for sale with a broker.

The broker’s listing agent asks the seller to fill out a Natural Hazard Disclosure (NHD) form, a local ordinance compliance form, and a hazard insurance conditions form as part of a listing package prior to placing the property in local multiple listing services (MLSs). The listing agent wants the disclosures done up-front in order to be as transparent as possible in an effort to side-step any possible claim of misrepresentation or deceit by the eventual buyer regarding the property’s proximity to high brush areas and the recent rash of wildfires in neighboring locations.

However, the seller is reluctant to do so, fearing the property will sit unsold in the slowing real estate market if up-front disclosures are made which might show the property in an unfavorable light to some buyers.

The property is published on area MLSs by the listing agent.

A buyer’s agent sees the property on the MLS. His buyer has been looking to get out of his current, more urban, and crowded neighborhood into a quieter, less densely populated area. The buyer’s agent informs his buyer of the MLS listing as the home is a qualifying property, meeting the buyer’s description of property sought. The buyer likes the location of the property, but has read about fires destroying homes in neighboring areas. Having seen it, the buyer wishes to make an offer, but the buyer’s agent, being aware that the property is in close proximity to wildfire hazards, asks the seller’s agent for environmental property disclosures before preparing and submitting an offer.

The seller is reluctant to provide information on the property, pushing his agent insteadto have the buyer submit an offer before the disclosures are handed over.

The buyer’s agent manages to persuade the listing agent to get the seller to fill out and sign an NHD form and a local ordinance compliance form, as he must do, and deliver them to the prospective buyer now. The NHD form notes that the property is in a Very High Fire Hazard Severity Zone and the local ordinance compliance form notes that the property is under a strict 100-foot brush clearance ordinance requirement. The buyer’s agent had suspected as much.

The buyer’s agent now needs to find out the conditions on the ground and the brush clearance operating costs. He asks for and gets information from the seller on the cost of hiring brush clearance contractors to meet the local requirements and the distance to the nearest fire station. Upon visiting the property, the buyer’s agent notes that the 100-foot local brush clearance requirement has been met, although very high brush conditions exist within 200 feet of the main structure of the property.

After further discussions about the brush clearance issue, the buyer’s agent submits an offer with contingency provisions providing for buyer approval of the availability and cost of a hazard insurance policy and purchase-assist financing.

On acceptance of the offer, the seller fills out a hazard insurance conditions form to be delivered to the buyer stating that the property is currently insured by a major property insurer at a very high premium and that a claim of $3,000 had been made on the property within the four years the seller has owned the property.

The buyer then engages an insurance agent to contact insurers for quotes on hazard insurance policies for the property.

The insurance agent contacts the current insurer about coverage. The insurer informs the insurance agent that they will not be issuing a new policy on the property for the buyer due to the history of brushfires within the last two years, the hazards within 200 feet of the property, and the claims on the property within the past five years.

Two other major voluntary insurers tell the insurance agent the same thing.

Realizing that his buyer is missing a crucial piece of hazard insurance information, the buyer’s agent asks the seller to provide either a Comprehensive Loss Underwriting Exchange (CLUE) report, available for free from, or an Automated Property Loss Underwriting System (A-PLUS), available from the insurer. The CLUE and A-PLUS databases, used by the nation’s insurance companies, track the insurance-claim histories of both people and properties for the past seven years. The seller’s CLUE report discloses the fact another claim of $4,500 had been filed by a previous owner five years ago.

The two claims within the past five years, together with the nearby brush hazards, made voluntary insurers unwilling to provide coverage on the home.

Realizing that he will not be able to obtain purchase-assist financing without some sort of hazard insurance policy on the property, does the buyer have any options left?

Yes! The insurance agent informs the buyer about the California Fair Access to Insurance Requirements (FAIR) plan policy, a type of “last-resort” coverage when voluntary insurers in the state of California are unwilling to provide basic property and hazard insurance. The insurance agent checks the FAIR plan’s listing of eligible areasand determines that the property is eligible for coverage. While a brush surcharge will be added to the premium due to the FAIR brush clearance requirement of 200 feet, a policy will be issued.

With a FAIR plan policy in place, purchase-assist financing can be obtained and the sales transaction can now be completed. The buyer was patient since the issue of hazards was known before he made his offer and did not arise as a surprise after getting into escrow, which may well have killed the deal. Anticipating the issue of coverage before making his offer, the buyer was not shocked by the availability of only limited hazard insurance coverage or its cost.

What is covered

The California FAIR plan is a private association in which all licensed insurers operating in California must participate. The FAIR plan’s profits and losses are shared by the association’s members in direct proportion to their market share of property insurance written in California. [Calif. Insurance Code §10095(a)]

FAIR plan coverage is available to all California property owners, not just to owners in urban or brush areas. However, basic underwriting guidelines must be met and a diligent effort must be made to obtain basic property insurance through normal channels before being entitled to apply for the FAIR plan. A signed statement certifying the owner has made a diligent effort to obtain other coverage must be submitted to the association with an application for FAIR coverage. [Calif. Insurance Code §10093(a)]

The FAIR plan covers:

  • structures;
  • contents under residential policies;
  • business personal property under commercial fire and business-owners’ policies; and
  • replacement cost coverage up to the policy limit for structures built after 1940 (structures built pre-1940 can also qualify if underwriting requirements are met).

Coverage does not become effective until payment is received in the FAIR plan office.

Optional Endorsements

The FAIR plan’s basic property insurance policy only provides coverage for the perils named in the policy. The following endorsements may be included if requested and written into the policy:

  • fire coverage for the structure and appurtenant structures;
  • fire coverage for personal property or the personal property of others;
  • replacement cost coverage for building structures, if underwriting requirements are met;
  • vandalism and malicious mischief for both structures and personal property (not including glass breakage or actual theft of property); and
  • extended coverage for both structures and personal property for damage caused by:
    • wind;
    • hail;
    • aircraft damage;
    • riot;
    • vehicle damage;
    • explosion; and
    • smoke.

Replacement cost coverage for residential dwellings pays up to the policy limit. It only covers buildings, not personal property or contents, and will only be issued if underwriting requirements are met.

A building code upgrade endorsement is available for residential properties containing one-to-four units, but the property must first qualify for replacement cost coverage in order to obtain the building code upgrade endorsement.

The endorsement covering the increased cost of construction due to code upgrades is only available for residential properties. The property must first qualify for replacement cost coverage in order to obtain the increased cost of construction endorsement.

Endorsements are available for an additional premium to insure against loss:

  • to improvements, alterations, and additions made or acquired at the property owner’s expense, even if rented to others;
  • caused by windstorm or hail, for which coverage is limited, to:
    • radio/television antennas and aerial, including their lead-in wiring, masts, and towers;
    • fabric or slat awnings or canopies, including their supports; and
    • signs; and
  • caused by the perils insured against (which can include windstorm and hail as an option) to plants, shrubs, and trees covered on the declarations page.

The plants, shrubs, and trees endorsement does not cover property grown for commercial purposes. The limit of liability set for plant coverage is limited and will only cover up to $250 for any one plant, shrub, or tree, including the expense incurred for removing debris.

What is NOT covered

The FAIR plan does not cover:



·water damage due to pipe breakage, etc.;

·replacement cost coverage for contents and non-building structures

Residential dwelling coverage limits

The maximum combined coverage limit for all residential dwelling structures, personal property, building code upgrades, etc., is $1.5 million at any one location on a replacement cost or actual cash value basis. This coverage limit also applies to residential properties in the course of construction, even thought these properties are subject to commercial rates and forms.

Increased Cost of Construction coverage (DP600) is not offered for new submissions with a combined limit of $1.4 million or greater.

Requests for primary insurance in excess of the $1.5 million limit must be approved by the FAIR Underwriting Vice President. The request must indicate the amount of excess insurance the applicant is trying to obtain with another insurer. However, it would be better if the amount of primary insurance in excess of the $1.5 million limit was obtained on a contributory (pro-rata) basis than a primary basis since an additional premium will be charged for FAIR to write primary insurance and provide a special endorsement form to allow the other insurer to provide the excess primary coverage. A billing for this additional premium will be mailed to the producer and applicant, and the premium must be paid within 25 days according to the terms and conditions of the endorsement billing. The premium will be substantially higher to write primary insurance.

Failure to notify the FAIR association of excess coverage provided by other insurers prior to a covered loss could leave the insured without adequate insurance coverage as the loss will be adjusted on a contributory basis, i.e., a pro-rata penalty during the claim adjustment process.

Commercial property coverage limits

Commercial property coverage provides a maximum combined limit of $4.5 million; $3 million for the structures and $1.5 million for personal property.

If the structures have a 24-hour guard service on the premises at all times, contents coverage for business personal property is available up to $5 million.

If the structures have both a 24-our guard service on the premises at all times and an operating sprinkler system approved by the Insurance Services Office, contents coverage is available up to $10 million.

Both of the above broader contents coverage must be approved by an underwriter and are subject to property inspections.

Business owner’s coverage limits

The maximum combined limit for properties written in conjunction with the FAIR plan’s business owner’s policy is $3 million; $2 million for the structure and $1 million for contents.

Brush clearance requirements

Brush clearance is measured from all structures, i.e.:

  • the main structure;
  • unattached garages;
  • guest houses;
  • pool houses; and
  • gazebos, etc.

Two hundred feet of brush clearance must be maintained from all structures. If this requirement cannot be met, the property will be subject to a brush/wildfire surcharge. Also, all combustible fuel bases, such as pine trees, that are within 200 feet of any structure must be trimmed up six feet off the ground and cut back 10 feet from the roof line of any insured structure. A brush/wildfire surcharge will be charged if this requirement is not met.

Brush surcharges applied in wildfire areas

The FAIR plan applies brush surcharges to properties located in wildfire areas, even if the property is not located in a designated brush area, since various types of brush indigenous to southern California are subject to the same brush conflagrations and probable maximum loss exposure as properties in brush areas. A list of cities and counties designated as FAIR plan brush/wildfire areas is available. []

The brush surcharge, which varies based on a number of factors, is applied if the property is:

  • in a forest;
  • surrounded by a cluster of trees similar to a forest which can result in a crowning-type fire; or
  • has indigenous native brush within proximity of insurable structures. []

However, the cutback of trees and native brush can decrease or even eliminate any surcharge on physical inspection of the property.

A physical brush inspection of the property is required for all new submissions unless the FAIR association has current rating information from a recent inspection on file. The inspector must review the entire perimeter of the property to determine the distance to brush and all structures that may be impacted.

Properties which are already covered by the FAIR plan may be re-inspected. About 20% of covered properties are re-inspected annually on a five-year basis to determine whether the current surcharge is appropriate for the current brush exposure.

Brush exposure surcharges on adjacent property

If a FAIR plan policy is subject to a brush surcharge solely because of an adjacent property owner’s failure to comply with brush clearance requirements, the surcharge can be imposed on the policy of the adjacent property owner, IF the adjacent property owner is also insured through the FAIR plan.

Policyholders must submit a form listing the names and addresses of adjacent property owners in order for the association to check if the adjacent property owners are insured with the FAIR plan.

All FAIR plan property owners subject to any additional brush surcharge, are given 90 days to correct the clearance-deficiencies before an endorsement is issued and additional premiums are imposed.

How fair is FAIR?

The rates and premiums for FAIR plan policies are not necessarily higher than the voluntary insurance market. All insurance rates are reported to the Department of Insurance and must be actuarially sound. [Calif. Insurance Code §10100.2(a)]

No additional insurance agent fees

The FAIR plan does not have insurance agents. Insurance agents cannot bind or commit the FAIR plan in any way.

Any licensed insurance agent can help a property owner obtain FAIR plan coverage at no additional cost to the property owner.

All requests for coverage are submitted to the FAIR plan on a brokerage basis. Licensed insurance agents represent property owners, not the FAIR association, and are not permitted to charge any brokerage, inspection, or other fees over the premium amount quoted by the FAIR plan. The agent cannot collect a fee from the property owner for completing or submitting any applications or forms in regards to the FAIR plan as the agent is paid on a commission basis by the FAIR association.