A court has rejected a legal challenge against surcharges imposed by insurers across California following the Los Angeles wildfires in January last year.

Property insurers in California are required to become members of the FAIR Plan safety net, which levied them an additional $US1 billion ($1.4 billion) to help cover the unprecedented wildfire claims.

In September 2024, Insurance Commissioner Ricardo Lara issued a bulletin allowing insurers to partially recoup from policyholders amounts requested “in the highly unlikely event that the FAIR Plan levies an assessment”.

Consumer Watchdog argued the FAIR Plan Act required member insurers, rather than policyholders, to bear their share of assessments and the commissioner exceeded his authority by allowing the companies to pass on costs to consumers.

“Commissioner Lara has again sided with insurance companies over the consumers he was elected to protect,” litigation director William Pletcher said.

“We disagree with the court’s decision and are reviewing options to continue protecting California consumers from these unlawful surcharges.”

The commissioner’s office says changes it introduced have helped stabilise the market, which faced insurers withdrawing due to the fear of major assessments by the FAIR Plan after disasters.

“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,” Mr Lara said.

The decision was handed down last week by the Los Angeles Superior Court.