Broker Manual


The California FAIR Plan Association (the FAIR Plan) is an association of all insurance companies authorized to transact basic property insurance in California. Established under State law, the FAIR Plan provides insurance coverage to qualified applicants who have been unable to secure insurance for their home or business in the normal market.

Brokers are not agents or representatives of the FAIR Plan in any respect and may not bind coverage on behalf of the FAIR Plan. They are not authorized to transact insurance coverage, or receive information from others on behalf of the FAIR Plan. Endorsements to FAIR Plan policies must be signed by an employee of the FAIR Plan authorized to do so, and no endorsement may be validly issued or signed by any other person on behalf of the FAIR Plan.

All brokers must have and maintain a valid property casualty license or an approved certificate of convenience from the California Department of Insurance to actively transact and conduct business with the FAIR Plan in accordance with section 1631 of the Insurance Code.

Insurance brokers should be aware that the California Department of Insurance adopted regulations governing the charging of Broker fees (Title 10 – California Code of Regulations, section 2189.1 et seq.) Section 2189.3 (b) of the regulations prohibits brokers from charging any fee, directly or indirectly, for services related to procuring coverage from the FAIR Plan. The Department defines “services” to include any advice or assistance.

In transacting insurance with, but not on behalf of the FAIR Plan, all licensed insurance agents and brokers act as insurance brokers for applicants and policyholders, not as agents of the FAIR Plan.

Brokers do not have the authority to issue Evidence of Insurance (EOI) forms for FAIR Plan coverage under any circumstances.

GENERAL INFORMATION

Coverages Available

Please refer to COVERAGES OFFERED for descriptions of and links to the policy contracts and endorsements.

Eligible Areas

All locations within California are eligible for FAIR Plan coverage after a diligent search for coverage has been made in the voluntary and surplus lines insurance marketplace.

Acceptable Named Insureds

  • Individuals.
  • Business Names. The names of principals, partners, or the corporate name must also be shown.
  • Limited Liability Corporation (LLC). The name(s) of the member(s)/shareholder(s)/owner(s) must be provided.
  • Trusts. The name(s) of trustees must be shown.
  • Estates. The FAIR Plan does not insure estates. It will, however, insure the administrator or executor of the estate and  his or her name must be shown.
  • Non-profit Associations or Clubs.
  • Bankruptcy Receivers. In bankruptcy situations, the bankruptcy receiver may be a named insured. Any entity overseeing the bankruptcy asking to be named as an additional insured (e.g. bankruptcy court) would be listed as a mortgagee.

Percentage interests of applicants or mortgagees are sometimes shown on the application. In this case names of principals will shown on the policy but “as their interest may appear” will be shown instead of the percentage of interests.

Maximum Limit of Coverage

Please refer to the Coverage Limits for information on the maximum limits available for each line of business (Dwelling, Commercial, and Businessowners).

No Broker Fee Notice

Insurance brokers should be aware that the California Department of Insurance adopted regulations governing the charging of Broker fees (Title 10 – California Code of Regulations, section 2189.1 et seq.) Section 2189.3 (b) of the regulations prohibits brokers from charging any fee, directly or indirectly, for services related to procuring coverage from the FAIR Plan. The Department defines “services” to include any advice or assistance.

Payment of Premium

The FAIR Plan sends an electronic copy of all new business quotations to the broker of record. An applicant’s copy of the quotation form accompanies all such forms. This copy explains how payments may be made and the terms and conditions of the offer. The Plan will accept payment under the terms and conditions of the offer from the broker of record or directly from the applicant or insured. All payments mailed to the FAIR Plan must be accompanied by a copy of the FAIR Plan quotation or billing form.

Endorsements and renewals are billed directly to the insured unless the FAIR Plan has been instructed to bill a different person/organization.

It is not necessary to write a separate check for each item, unless payment is being made for a CEA earthquake policy.

Although most brokers are very responsible when it comes to remitting premiums to the FAIR Plan on behalf of the brokers’ clients, some brokers have either failed to do so altogether after their clients have paid them, or have remitted with checks drawn on closed accounts or accounts with insufficient funds. Upon the failure of such a broker to provide cashier’s checks, money orders, or other payment in good funds when requested to do so by the FAIR Plan, the FAIR Plan reserves the right to discontinue doing business with that broker. The FAIR Plan may also discontinue doing business with brokers for other reasons, as well. Should the FAIR Plan elect to discontinue doing business with a broker, any inforce policies will be endorsed to “No Broker” policies unless other arrangements have been made by the broker to transfer the policies to another registered broker.

All premiums must be paid in the gross amount.

Automated Payments Online

The FAIR Plan accepts electronic checking or savings account payments from brokers, policyholders or third parties on new business quotations, mid-term endorsements, and renewal offers for FAIR Plan residential, commercial, and businessowner (BOP) policies via the Make a Payment link on the home page of our website.

The FAIR Plan are utilizes an Automated Clearing House (ACH) as an intermediary before posted payments reach its bank. Although payments will be deemed as received once the transaction is submitted, insurance brokers can not bind coverage or commit the FAIR Plan in any way.

Verifying Payment and Policy Status

Brokers and insureds can Check Policy Status or Check Payment Status 24/7 from the web site home page. This information can also be accessed in either English or Spanish at (213) 487-0111.

Waiver of Premiums Owed

The FAIR Plan will waive additional premiums owed if the amount is $3.00 or less.

Effective Dates of Coverage

Please refer to Effective Dates of Coverage for information on effective dates for new business and endorsements.

Escrow Closings

Please refer to Evidence of Insurance for Escrow for information on these requests.

Inspections

Properties are inspected at the discretion of the FAIR Plan after the policy is issued to determine the physical condition of the property or to establish the basis for a brush/wildfire charge for Commercial policies. These inspections are not for the purpose of determining property valuation or correcting inaccuracies in the information submitted in the application for insurance or renewal of insurance.

In the event the inspection report shows the risk does not meet the FAIR Plan underwriting standards but can be improved to meet such standards, the FAIR Plan will advise the insured and the broker what deficiencies were noted in the inspection report that must be corrected in order for the property to remain eligible for insurance. Upon correction of the deficiencies by the insured, the FAIR Plan must receive photos and/or receipts as proof that the deficiencies have been corrected in order for the policy to remain inforce.

If the inspection report shows that the property is uninsurable according to the FAIR Plan underwriting standards, the policy will be cancelled, non renewed, or rescinded and the insured, broker, and mortgagee will be notified of the reason for the cancellation, non renewal or rescission.

Properties submitted to the FAIR Plan for coverage consideration must be in insurable condition, and meet the FAIR Plan’s underwriting guidelines. If the risk submitted for coverage has any existing property damage, the FAIR Plan will decline to issue a quotation UNLESS a copy of a contract signed by a licensed contractor and the applicant is submitted with the new business application. The contract should indicate in detail the scope of the work to be done, the start date and projected completion date.

If an insured with a brush/wildfire charge on their Commercial policy secures additional clearance and desires a brush/wildfire re-inspection, a written request should be submitted directly to the FAIR Plan. A re-inspection will be ordered and the results of that inspection will be communicated directly to the insured with a copy to any broker acting for the insured.

Right of Appeal

Any applicant or insured shall have the right of appeal to the FAIR Plan within 60 days of written notification of an adverse underwriting finding or decision of the FAIR Plan. Each notification of a potentially adverse action shall be accompanied by a statement that the applicant has the right to appeal and will also set forth the procedures to be followed for such appeal.

An appeal does not extend coverage to a new applicant, extend the term of a policy if a policy is in effect, nor change the effective date of a cancellation.

Cancellations

All premium refunds resulting from policy cancellations are computed on a pro rata basis.

The FAIR Plan will cancel a policy effective the date the FAIR Plan receives the request for cancellation via the Broker System on the FAIR Plan web site or in writing from the insured unless the date of cancellation requested is a later date.

If the request for flat cancellation of a new business policy is received within 30 days of the inception date, the policy will be cancelled flat.

If the policy has been in force for more than 30 days, and the requested date of cancellation is earlier than the date the request is received in the FAIR Plan office, a reason for cancellation must be given (e.g. property being sold, coverage placed with another carrier).

If the property was sold, the FAIR Plan should be notified of the desired cancellation date. If the date of cancellation is more than 30 days prior to the date the request is received, a copy of the escrow Closing Statement will be required by the FAIR Plan.

If coverage has been replaced by another insurance company (or companies) the FAIR Plan policy will be cancelled effective the inception date of the replacement policy. If the date of cancellation is more than 30 days prior to the date the request is received, a copy of the replacement policy will be required by the FAIR Plan.

If the request for cancellation is received more than 90 days from the date coverage is replaced, cancellation will be effective the date the request is received but credit will be allowed for duplicate insurance if a copy of the replacement policy is submitted (per California Insurance Code Sections 485-486).

Installment Plan/Financing Premiums

The FAIR Plan has an optional installment plan applicable for either residential or commercial properties. If the annual premium is $250.00 or more, premiums may be paid in three installments consisting of a 40% down payment, and two separate installments of 30% each, with the second installment due three months from the inception date of the policy. The final installment is due six months from the inception date of the policy.

There is a $2.50 service charge applicable for each installment billing, for a $7.50 total transaction fee.

The FAIR Plan will generate and mail a billing notice 30 days before the due date of the second installment, and the final installment.

When a request to add or increase coverage is received, an endorsement Quotation is issued showing the additional premium resulting from this change. This additional premium must be paid in full (outside the installment billing) in order to endorse the requested coverage change to the policy.

If an additional premium endorsement is generated by the FAIR Plan (e.g. occupancy, construction type, protection class), additional premiums due will be spread over any remaining installment payments.

California FAIR Plan will accept a commercial premium financing agency gross payment for the full amount of our billing.

Claims

It is the insured’s duty under the policy to report any loss or damage to covered property directly to the FAIR Plan. Insurance agents and brokers are not agents or representatives of the FAIR Plan in any respect, and a report to them of loss or damage does not satisfy the insured’s duty to notify the FAIR Plan.

Losses may be reported 24/7 via the Report a Claim link on the home page of the FAIR Plan’s website at www.cfpnet.com. Losses may also be reported via phone at (213) 487-0111.

The Claims Department will make every effort to acknowledge receipt of the notice of loss to the insured and broker within 24 hours, and the acknowledgement will include both the claim number and name and contact information of the adjusting company.

Brokers and their staff should be familiar with the Claims Practices Regulations relative to submitting claims on behalf of their client(s) in a timely manner. Copies of the regulations can be obtained from the Department of Insurance.

Commission Rate

Commission Statements

Commissions are paid monthly by the tenth (10th) day of every month.

All premiums must be paid in the gross amount.

Brokers may not deduct commissions from any premiums due when making payment.

Broker Changes and Mergers

To be recognized by the FAIR Plan as effective, letters of record changing brokers must be signed by the insured, or the broker releasing the account, and the broker acquiring the account. Broker of record changes will not be accepted for new business quotations.