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Gaeton St. Cyr v. California Fair Plan Association

(California Fair Plan Properly Applied Policy Limits Under Property Policies Based on Actual Cash Value For Homes Destroyed by Fire in High Risk Area And Was Not Required to Pay Any Additional Amounts Based on Alleged Failure to Comply With The Standard Form Fire Policy Set Forth in Insurance Code Section 2071)

In Gaeton St. Cyr v. California Fair Plan Assoc., 223 Cal.App.4th 786 (January 31, 2014), the California Second District Court of Appeal affirmed the trial court’s order dismissing several complaints against the California Fair Plan (“Fair Plan”) arguing that property policies issued to plaintiffs covering homes in high risk fire areas failed to comply with the protections provided in the “standard form fire policy” set forth in Insurance Code section 2071. As such, plaintiffs were not entitled to additional payments for damages sustained by other structures and property in addition to the damages sustained by plaintiffs’ homes. Fair Plan paid out total policy limits afforded by each of its policies to the plaintiffs based on an actual cash value approach. Essentially, because the plaintiffs’ fire losses exceeded the actual cash value of their homes, Fair Plan paid out the policy limits afforded under property policies affording coverage for each of the plaintiffs’ homes.

In affirming the trial court’s order dismissing the plaintiffs’ complaint, the Court of Appeal held that policies issued by the Fair Plan complied with Insurance Code sections 10090 through 10100.2, notwithstanding that the policy forms issued to plaintiffs were not identical to the forms initially approved by the California Insurance Commissioner. Because the forms in question did not result in a rate impact, such forms complied with these code sections.

In addition, the Court of Appeal held that the exceptions to Insurance Code sections 2070 and 2082 entitled the Fair Plan to issue policy forms which did not comply with the provisions of the California Standard Form Fire Insurance Policy set forth in section 2071, as such forms provided coverage substantially equivalent to that afforded by the basic fire insurance policy provided for in Section 2071.

Lastly, the Court of Appeal held that policy forms issued to plaintiffs by Fair Plan afforded the same basic fire insurance as required by section 2071. The Court of Appeal stated as follows:

Respondent asserted below that it had paid appellants the full amount of their policy limits, and the trial court found respondent had fulfilled its obligations under the written insurance contracts. Respondent was required to do no more under the standard form fire policy. Contrary to appellants' contention, they were not entitled to the ACV of the dwelling and of other real and tangible property without regard to the policy limits. They were entitled to such compensation only "to an amount not exceeding" the limits of their policies.

For similar reasons, appellants were not entitled to additional coverages in excess of their policy limits. For example coverage for "Other Structures" or “trees and shrubs" is subject to the overarching policy limit set forth in the "amount not exceeding _____ dollars." Coverage for debris removal and for additional living expenses is not mentioned in the standard form. To the extent such coverage can be implied as part of the cost to repair or replace the property, which we specifically decline to find, such coverage is also subject to the policy limits. Finally, coverage for building code upgrades or for loss of rental value was specifically excluded from the calculation of the ACV of the insured property; moreover, were such coverage included, it would be subject to the policy limits. In short, appellants have failed to show they were statutorily entitled to recover for losses in excess of their policy limits.

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