A California judge has ruled that Insurance Commissioner Ricardo Lara acted within his authority when he introduced reforms designed to stabilize the state’s troubled property insurance market, dismissing a lawsuit filed by Consumer Watchdog.

The ruling allows insurers to recover part of the costs they face when the California FAIR Plan—the state’s insurer of last resort—needs extra funding after major disasters. The court found that Lara had the legal authority to set rules limiting how much of those costs insurers can pass on to policyholders.

The rules were first put to the test after the January 2025 Los Angeles wildfires, when the FAIR Plan requested $1 billion from its member insurers. Under Lara’s rules, insurers were allowed to recover only a portion of those costs from customers, subject to regulatory approval and spread over two years. The average homeowner paid about $28 per year.

Lara said the decision will help attract more insurers back to California’s regular insurance market and reduce reliance on the FAIR Plan. The California Department of Insurance said the ruling provides certainty for its efforts to improve insurance availability while protecting consumers.

“While critics choose to complain and litigate from the sidelines, we are doing the hard work to fix a broken system, lower reliance on the FAIR Plan, and get companies back to writing policies. This victory sends a loud and clear message: The era of allowing special interests to derail consumer choice is over. We have the momentum, we have the authority, and we will continue to fight until every California has access to the coverage they deserve.” – Lara.