Fair Plan Stopped Fair Rental Value Payments paul mcconnell asked 2 weeks ago
Fair Plan Stopped Fair Rental Value Payments

We lost our house in the Eaton Fire last year. By May, we had settled all parts of our claim that didn’t involve incurred costs.

At the moment, we are partway through a one-year lease. This is a lease I signed, mind you, relying on Fair Rental Value (FRV) payments. This past month, the Fair Plan informed us that we were not making enough progress on our rebuild. They said they were closing our file and discontinuing FRV payments until we can provide either a signed contract with a builder or a set of architectural plans.

To date, I have provided the – after they began requesting documentation back in January – with the following: the results of my soil tests (which I received in December after months of waiting), two floor plans that I personally spent hundreds of hours drawing and revising, several conceptual renderings, contemporaneous notes on builders I’ve been speaking with, and a design quote from a builder we were seriously considering.

In other words, we have been taking good-faith steps in the rebuilding process, even while constrained by limited coverage and high current market costs. The adjuster told me flat out that “shopping around” was not going to be sufficient. However, given the well-known delays in the Los Angeles rebuild, due to the very factors I’ve described, what the adjuster calls shopping around, I would call due diligence. It’s similar to trying to buy a home on a budget.

For example, I have a meeting in two days with a builder who is part of an alliance aiming to consolidate costs by grouping builds and leveraging bulk purchasing. I also have another meeting three days after that to review a Rough Order of Magnitude estimate with a different custom builder.

My question is: can the Fair Plan take this position when we are still well within our coverage limits?

1 Answers
Troy Willis Troy Willis Expert answered 5 days ago
0 Vote Up Vote Down

This is a genuinely difficult situation, and your frustration is completely understandable. You’ve been doing real work, and the adjuster’s characterization of it as mere “shopping around” seems unfair, given the well-documented chaos of the post-fire rebuild environment in LA. To your core question: can the Fair Plan do this? The honest answer is that it’s complicated, and you should speak with a California bad-faith insurance attorney as soon as possible; many offer free consultations. That said, here’s the legal and practical landscape:

California law (and most ALE/FRV policy language) generally requires that the insured be making reasonable progress toward rebuilding, not that they meet arbitrary documentation milestones set unilaterally by the insurer. Soil tests, floor plans, builder meetings, and design quotes are substantive, not superficial. The Fair Plan cannot simply redefine “reasonable progress” in a way that ignores the external conditions causing delay. The post-Eaton rebuild environment, permitting backlogs, contractor scarcity, and elevated costs, is a matter of public record. Courts and the CDI are aware of it.

Cutting off FRV while you are still within your policy period and coverage limits, and while actively pursuing a rebuild, may be an actionable bad-faith move, particularly if the policy language doesn’t specifically require a signed contract or plans by a set date. Your lease exposure is significant. You signed it relying on FRV coverage. That reliance, and any damage from it, could matter in a bad-faith analysis. Policies typically require the insured to be actively rebuilding “as soon as reasonably possible,” and may allow the insurer to verify this through documentation. They may argue that a design quote and conceptual drawings don’t demonstrate sufficient commitment to a specific rebuild path.

What you should do right now:

1) File a complaint with the California Department of Insurance (CDI). The CDI has been actively monitoring insurer conduct in the Eaton/Palisades fire zone. A complaint creates a paper trail and sometimes prompts insurers to reverse course quickly.

2) Send a written response to the Fair Plan (via certified mail) documenting everything you’ve provided, framing it explicitly as evidence of good-faith progress, and formally disputing their characterization. Reference the external rebuild delays as factors outside your control.

3) Consult a bad-faith insurance attorney. Given your lease exposure and the FRV cutoff, this has real monetary stakes. Many attorneys work on contingency in bad-faith cases.

4) After your builder meetings, get written summaries or follow-up emails, even informal ones, and send copies to the Fair Plan proactively. A Rough Order-of-Magnitude estimate from a custom builder is meaningful documentation.

The Fair Plan taking a hard line is not the same as the Fair Plan being right, and in California, insurers who act in bad faith face real consequences. You have a reasonable case that their position is premature and unsupported by your actual conduct. I’m not a lawyer, and this isn’t legal advice, but your instinct that something is wrong here is well-founded. The California Department of Insurance complaint costs you nothing and should be your first call tomorrow morning. I hope that answers your questions and good luck!