California Supreme Court Affirms California Fair Plan Ass’n v. Garnes, and Preserves Homeowners’ Interests

The California Department of Insurance recently issued a press release announcing that the California Supreme Court affirmed the homeowner reimbursement protections recently decided in California Fair Plan Association v. Garnes.¹ Back in June, my colleague Kevin Pollack wrote about the recent decision and whether actual cash value means fair market value or replacement cost minus depreciation in, Does Actual Cash Value Mean Fair Market Value or Replacement Cost Minus Depreciation.

Last week, the California Supreme Court refused to consider the insurance industry’s petition to overturn a lower court’s decision that insurers must pay to repair a home even if the repair costs exceed the home’s market value. There, a house fire occurred and the homeowner submitted a claim for $320,549 to her insurer, California Fair Plan Association. This amount represented the cost to repair the damaged home, less depreciation. Garne’s FAIR fire insurance policy had a limit of $425,000, yet Fair Plan denied the claim and only paid $75,000, which was determined to be the fair market of the property in 2011 (in large part due to the mortgage-driven recession).

The supreme court’s refusal to consider the proposal ended an ongoing battle and cemented an important decision that protects homeowners’ interests. Insurance Commissioner Dave Jones stated: “This is an important win for homeowners who should have confidence their insurer will deliver on its promises regardless of housing value fluctuations.”² Jones filed an amicus brief in support of Garnes, arguing the Insurance Code entitled Garnes to be reimbursed. The lower court agreed and relied on Jone’s interpretation of the Insurance Code when ruling in Ms. Garne’s favor.

The Insurance Commissioner appeared as an amicus curiae, or friend of the court. Jones’ interest was in protecting consumers and ensuring the Insurance Code is properly interpreted and enforced. Our friends over at United Policyholders also filed an amicus brief supporting Garnes and advocating for homeowners’ rights.
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¹ California Fair Plan Ass’n v. Garnes, No. A143190, 2017 WL 2303165 (Cal. Ct. App. May 26, 2017).
² http://www.insurance.ca.gov/0400-news/0100-press-releases/2017/release082-17.cfm